Economics newsletter edition #2

Page 1

NOVEMBER 30, 2014

DUBAI COLLEGE

Japan Slips Into Recession

Selfielastic Demand:

THE END OF ABENOMICS?

WHY CONSUMERS ARE IDIOTS

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China’s Economic Slowdown

DC ECONOMICS Japan Slips Into Recession: The End Of Abenomics? Abenomics is the name given to a suite of measures introduced by Japanese prime minister Shinzo Abe after his 2012 re-election to the post. His aim was to revive the Japanese economy with “three arrows”: fiscal stimulus, monetary stimulus, and structural reform to boost Japan’s competitiveness. At first, the moves seemed to work a miracle as Japan’s stock market soared however, the blow came on Monday when figures showed that the world’s third largest economy shrank 1.6% - a second straight quarter of economic contraction: the definition of a recession. Most economists agree that the immediate cause was the increase in sales tax from 5% to 8%, a move approved by the previous government that was intended to curb Japan’s immense government debt. The increased tightening of consumer spending has raised concerns that after years of sluggish wage growth, consumer confidence is too weak to handle to handle the tax increase. Consumer spending barely picked up from its depressed levels after the first tax increase in April, while indicators of housing and business investment declined. Japan’s recession could also have an impact on many US companies that rely on Japan for sales. The best example of this would be the diamond company Tiffany, who relies on Japan for 10% of their sales. Japan’s unorthodox strategy was also supposed to offer a road map for other troubled economies, notably Europe. Europe must now decide whether to follow Japan’s lead by injecting more money into the economy, as the region’s central bank considers a similarly aggressive bond-buying campaign known as quantitative easing. Ashna Gupta

SELFIELASTIC DEMAND: WHY CONSUMERS ARE IDIOTS 2014, a year that has truly amplified the popularity of the selfie. Other than the cute charm that this trend possesses, it has also unintentionally, completely changed the market for phones and cameras; it has not only changed consumer tastes, a factor that affects demand, but it has also changed a plethora of other factors regarding the two markets. Let’s take a look at one particular phone, the HTC One M8. The M8 is an excellent example of a company (HTC) giving the consumers exactly what they want; the "1


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