The Upstream-Downstream Hypothesis And Corporate International Diversification Theory The WritePass Journal

The Upstream-Downstream Hypothesis And Corporate International Diversification Theory ABSTRACT The Upstream-Downstream Hypothesis And Corporate International Diversification Theory ABSTRACTINTRODUCTIONUPSTREAM-DOWNSTREAM HYPOTHESISINTERNATIONALIZATION AND SYSTEMATIC RISKINTERNATIONALIZATION AND LEVERAGECORPORATE INTERNATIONAL DIVERSIFICATIONAGENCY COSTS AND FINANCIAL STRUCTURE OF MULTINATIONALSINTERNAL CAPITAL MARKETSAGENCY COSTS OF DEBTCONCLUSIONREFERENCERelated ABSTRACT The study of multinationals has received much attention in literature. Certainly, it has become a subject of controversy among the scholars. On the one hand, some researchers including Reeb Mansi (2001), Chkir Cosset (1999) and Chen et al. (1997) point out to the diversification benefits to multinationals due to risk reduction inherent in operations within imperfectly correlated markets. While on the other hand, the more recent research by Reeb, Kwok Baek (1998) and Bartove, Bodnar Kaul (1996) notes a positive relationship between internationalization and high debtholder monitoring costs.Against this backdrop, this analysis suggest an alternative upstream-downstream hypothesis whereby the overall effect of internationalization on the risk and leverage of multinationals is dependent on the market conditions of the host and target country. The paper examines the theory that multinationals should have lower risk and higher leverage than non-multinationals and explains the difference between this theory and the upstream-downstream hypothesis. Also included in this analysis, is an explanation for the documented puzzle that multinationals tend to have lower levels of long-term debt but more use of short-term debt than non-multinational firms. INTRODUCTION The study of multinationals has received much attention in literature. Over the last few decades, it has become a subject of controversy among the scholars. It has generated more heat than light with some suggesting diversification benefits to multinationals, while others point out to the positive relation between a firm risk and internationalization. Against this backdrop, we suggest an alternative upstream-downstream hypothesis whereby the overall effect of internationalization on the risk and leverage of multinationals is dependent on the market conditions of the host and target country. Previous researchers including Reeb, Mansi Alee (2001), Chkir Cosset (2001) and Chen et al. (1997) found a positive relationship between internationalization and debt ratio due to risk reduction inherent in operations within imperfectly correlated markets. On the contrary, Burgman (1996) and Lee kwok (1988) demonstrated a negative relationship between internationalization and debt ratio that results from increased risks due to agency costs, and political and exchange rate risks. Similarly, while the findings obtained from Initial research by Hughes, Logue Sweeny (1975) are consistent with the diversification benefits, the more recent research by Reeb, Kwok Baek (1998) and Bartove, Bodnar Kaul (1996) found a positive association between the risk of a firm and internationalization. Additionally, while focusing on leverage, Burgman (1996) noted that internalization may result in higher debtholder monitoring costs and thus significantly reducing the levels of leverage. Consistent with greater agency costs, Lee Kwok (1988) and Chen et al. (1997) found that the domestic corporations would in general tend to have significantly higher debt ratios relative to the MNCs. Clearly, from what can be discerned, the study of internationalization of firms has become a controversial issue among scholars. This analysis is thus an attempt to shed light on the above by exploring on both international diversification benefits and the upstream downstream hypothesis. We begin out analysis by examining the upstream and downstream hypothesis UPSTREAM-DOWNSTREAM HYPOTHESIS Kwok Reeb (2000) argue that there is an increase in risk and a reduction in debt usage when firms from stable economies make investments internationally (downstream). Conversely, the risk is reduced and debt usage increased when firms from weaker economies make investments internationally (upstream). It therefore follows that the overall effect of internationalization on firm’s leverage and risk is dependent on the characteristics of the home and target economy. The firms’ behaviour towards international activity or rather the overall effect of internalization on firms leverage and risk is dependent upon whether the firm is moving upstream or downstream (Kwok Reeb 2000). For example, for multinationals based in the United States (which is among the most stable economies in the world), their overseas expansion tend to exacerbate risk. This increase in risk may not be totally offset by the risk reduction due to international diversification and thus resulting in a downward adjustment of the firms leverage. On the converse, for firms in the emerging economies, investment internationally in the developed economies leads to a reduction in corporate risk and subsequently an upward adjustment of leverage. INTERNATIONALIZATION AND SYSTEMATIC RISK The upstream downstream argument can be extended to the systematic risk area. Multinationals, by definition, have their operations diversified into various countries. The systematic risk of an ith operation can therefore be defined as É“i (Reeb, Mansi Allee 2001). É“i = (Ï im ÏÆ'i)/ ÏÆ'm Where Ï im represents the correlation between the market return and firms return ÏÆ'i represents the firms return standard deviation    ÏÆ'm refers to the market returns standard deviation An ith operation is thus influenced by the nature of the business operation and the economic system of the country where the operation takes place (Reeb, D.M., S.A. Mansi and J.M. Allee, 2001). Take for example a project that is located in a more volatile emerging economy. This project would tend to have a higher value of total risk, ÏÆ'i. Unless there is an offset of the high standard deviation by a lower correlation coefficient Ï im, the systematic risk É“i would be higher. On the converse a project that is located in a more stable economy tend to have a lower value of its total risk, ÏÆ'i. Similarly, unless there is a substantially higher value of correlation efficient Ï im, the systematic risk É“i tend to be lower. For any multinational, its overall systematic risk is simply the weighted average of the betas (É“i) of all its business operations within the various countries (Reeb, Mansi Allee, 2001).    É“mnc = Æ © Ã… ´i É“i Where Ã… ´i represents a fraction of the total capital invested by the MNC in the ith countrys operation. Therefore, for a firm that is headquartered in a more stable economy, expansion of its operations into a less stable market would increase the overall beta (É“mnc) of the firm, due to potentially greater environmental risk for the new operation (Reeb, Mansi Allee, 2001). Conversely, when a firm that is headquartered in an emerging economy expands its direct investments into a developed economy, its overall beta may decrease. The ability to arbitrage markets may as well differ due to the economic differences of the home and target economies (Reeb Kwok 2000). Take for example, the shift of income. The ability to have the income shifted among different tax regimes depends on the degree of sophistication of the host and target government (Reeb Kwok 2000). Firms that are based in economies which are more developed and with greater resources, tend to have fewer opportunities for shifting their income (Reeb Kwok 2000). In contrast, firms that are based in the volatile emerging economies tend to have different opportunities to arbitrage labour and capital markets (Reeb Kwok 2000).   That is, firms that are moving upstream have more opportunities to hire employees with different sets of skills and experience than those that are moving downstream. This implies that firms’ behaviour towards international activity varies with the characteristics of the home and target market. Therefore, the overall effect of internationalization on the firms risk and leverage depends on whether the firm is moving upstream or downstream. INTERNATIONALIZATION AND LEVERAGE Aligning with the above, the association between internationalization and firm risk suggests a leverage effect as well. Traditional capital structure theory posits that as firm risk increases the debt utilization decreases (Reeb Kwok 2000). Hence, for firms that are based in the more volatile emerging economies, their overseas expansion may lead to more debt utilization, as they may gain access to debt that was not previously available. The converse is also true. This view of the leverage aspect of upstream-downstream hypothesis suggests a negative association between leverage and internationalization for firms based in the more developed economies and vice versa (Reeb Kwok 2000). That is, firms that are moving upstream tend to have a positive relationship between the firms leverage and internationalization while those moving downstream tend to have a negative association. This implies that the overall effect of internationalization on the leverage of multinationals is equally dependent on the home and target market conditions. This next section will explore on the corporate diversification theory and the effect of agency costs and internal capital markets on the firms’ leverage. In particular, the agency conflicts and efficiency of internal capital markets will be used in providing an explanation as to why multinationals tend to have lower levels of long-term debt but more use of short-term debt than non-multinational firms. CORPORATE INTERNATIONAL DIVERSIFICATION The corporate international diversification theory posits that multinationals should have lower risk and higher financial leverage than the domestic corporations (Doukas Pantzalis 2001).   One of the main reason as to why corporations would not take 100% debt in their capital structure is because of the risk of insolvency (Doukas Pantzalis 2001). Given that this risk is not linear but increases with higher debt levels, firms can thus limit their leverage in order to avoid incurring bankruptcy costs. There are a variety of business risks as well as opportunities that stem from corporate international diversification. Business risk which is typically measured by the volatility of the operating net income refers the cost of financial distress or rather bankruptcy cost (Doukas Pantzalis 2001). Both the domestic and multinational firms are also faced with exchange rate risk. That is, the risk that fluctuations in currencies will affect the demand and supply, price and cost characteristics of the corporation. There is also the risk of higher agency costs which faces multinational firms. MNCs face higher agency costs due to auditing costs, monitoring costs, different accounting systems, different legal systems, sovereignty uncertainties, language differences, labour market and capital imperfections as well as the different asset structures (Doukas Pantzalis 2001). Agency costs are known to have a significant impact on the optimal debt level as will be discussed below (Doukas Pantzalis 2001). Political risks arise from political events that may have adverse effects on the economic wellbeing of the firm. For example, potential conflicts may arise between the goals of the government and those of the foreign firms. This is especially the case with foreign direct investment, given their effect on the host economy. Among the benefits put forth by scholars is the view that through international diversification, firms are able to increase on their debt capacity and reduce their bankruptcy costs (Doukas Pantzalis 2001).   It has been argued that risks are reduced by portfolio effects due to the imperfect correlation of foreign cash flows. In this regard, Fatemi (1984) and Agmon Lessard (1977) point out that diversification benefits reduce the bankruptcy costs and increase the debt usage by multinationals. AGENCY COSTS AND FINANCIAL STRUCTURE OF MULTINATIONALS The documented puzzle that multinationals tend to have lower levels of long-term debt but more use of short-term debt than non-multinational firms warrants an explanation. There are many reasons as to why one would expect multinationals to have different leverage ratios relative to the domestic corporations. First, given the international nature of their operations, MNCs are expected to have access to more capital sources unlike the domestic firms (Doukas Pantzalis 2001). Therefore, they can raise more capital via foreign debt financing and at more favourable terms than the domestic corporations (Doukas Pantzalis 2001). Consider, for example, the case of multinationals that have subsidiaries in countries with different tax rates. These multinationals can benefit a lot by borrowing through foreign affiliates exposed to high tax rates, hence increasing their tax shields (Butler 1999). It therefore follows that due to access to external sources of financing, these multinationals should in general have higher debt ratios than the domestic firms (Butler 1999). Another reason as to why Multinationals should exhibit higher debt ratios than non-multinational firms is that the foreign debt can be used as a hedging instrument against the risk of foreign exchange (Butler 1999). Given that multinationals have higher levels of foreign exchange exposure in comparison to the domestic firms, they are thus expected to make greater use of debt financing than the local firms (Butler 1999). Additionally, since multinationals are subject to political and exchange rate risk exposures, it is expected that these multinationals should have higher overall debt ratios relative to the local firms (Butler 1999). Thirdly, due to industrial and geographical diversification of operations of MNCs, they are expected to have lower business and financial risk than the domestic firms (Doukas Pantzalis 2001). This has the impact of reducing the cost of debt and therefore increasing leverage. This implies that the leverage of multinationals should have a positive relation with foreign involvement while financial distress should have a negative and greater bearing on DMCs leverage (Doukas Pantzalis 2001). However, while hedging, financial distress, liquidity and operating considerations imply that multinationals are more likely to have greater leverage than the domestic corporations, findings from empirical studies show that these multinationals have instead lower long-term leverage relative to the domestic firms (Doukas Pantzalis 2001). Three possible explanations can be given for this finding. These include: (Doukas Pantzalis 2001) Efficiencies of internal capital markets Agency costs of debt Legal and institutional differences across counties where multinationals operate. INTERNAL CAPITAL MARKETS Since MNCs have numerous divisions operating across countries, they tend to create extensive internal capital markets which may provide cheaper financing relative to the external markets (Doukas Pantzalis 2001). Hence, where the internal capital market is efficient, MNCs tend to rely more on internal financing than the external one. As a result, they tend to have lower leverage than the domestic firms. Consequently, a non-positive relation between the firms leverage and its foreign operations can emerge when internal capital markets bypass external capital market informational asymmetries (Doukas Pantzalis 2001). In a recent study, Matsusaka Nanda (1997) and Scharfstein Stein (1997) examined the improved capital allocation in internal capital markets and the associated agency costs for firms that had diversified their operations. They found that diversified firms could use internal capital markets in funding profitable projects, which would not be financed in external capital markets due to agency costs and information asymmetries. This implies that the external debt financing need for multinationals can be attenuated and that the low levels of leverage for Multinationals should reflect the strengths of internal capital markets (Doukas Pantzalis 2001). This view certainly indicates a negative relation between industrial diversification and the leverage of multinationals. That is, MNCs debt ratios should exhibit a negative and more pronounced association with industrial diversification than the domestic firms. AGENCY COSTS OF DEBT The agency cost of debt effect on leverage of multinationals arises from their industrial diversification. Since their operations are geographically dispersed, the cost of gathering and processing information is generally more costly for MNCs than the domestic firms (Doukas Pantzalis 2001). Therefore, multinationals are expected to have more inherent agency problems between the debtholders and shareholders due to their diverse geographic structure. It therefore follows that bondholders will require higher interest payment on loans to firms that have greater monitoring costs and are more susceptible to asymmetric information problems (Doukas Pantzalis 2001). This implies that firms which have diversified their operations are more likely to have their debt ratios lower than domestic firms. Further, firms with greater foreign involvement are expected to have a negative and more pronounced relation between the firms leverage and agency costs of debt, than the domestic firms (Doukas Pantzalis 2001). Several authors have suggested that, unlike the domestic firms, multinationals are likely to support more debt in their capital structures. Burgman (1999), however, contests this claim and in fact argues that multinationals have, in the actual sense, less debt in their capital structure. He addresses whether factors such as the political and exchange rate risk and the agency costs can explain this phenomenon. The findings of his study show that multinationals tend to have higher agency costs and that diversifying their operations does not lower their earnings volatility. CONCLUSION Clearly, there are inherent business risks as well opportunities that stem from corporate diversification. While we do not ignore the cross-border benefits of corporate diversification, we suggest that the overall effect of internationalization on the firms risk and leverage can be predicted by an upstream-downstream hypothesis. REFERENCE Agmon, T. and D. Lessard, 1977. â€Å"Investor recognition of corporate international diversification†. Journal of Finance, 32:1049-55. Bartov, E., G. Bodnar, and A. Kaul,   1996.  Ã‚   â€Å"Exchange rate variability and the riskiness of US multinational firms: Evidence from the breakdown of Bretton Woods†. Journal of Financial Economics, 42: 105-132. Burgman, T. A., 1996. â€Å"An empirical examination of multinational corporate capital structure† Journal of International Business Studies, Vol 30, pp. 553-570. Butler, K.C., 1999, Multinational Finance, 2nd edition, Cincinnati, OH: South-Western College Publishing Chen, C.J. P., C.S. Cheng, H. J. Agnes, and K. Jawon, 1997. â€Å"An investigation of the relationship between international activities and capital structure† Journal of International Business Studies, p. 563-577. Chkir, I.E. and J.C. Cosset, 2001. â€Å"Diversification strategy and capital structure of multinational corporations†. Journal of Multinational Financial Management 11, 17–37. Doukas, J.A. and C. Pantzalis, 2001. Geographic diversification and agency costs of debt of multinational firms. Old Dominion University.   http://papers.ssrn.com/abstract=282850 {accessed on 30th December 2011} Fatemi, A. 1984. â€Å"Shareholders Benefits from Corporate International Diversification†, Journal of Finance Vol. 39 No.5. Hughes, L., D. Logue, and R. Sweeney, 1975. â€Å"Corporate international diversification and market assigned measures of risk and diversification†. Journal of Financial and Quantitative Analysis, 10:627-37. Kwok, C. Y. Chuck and D. Reeb, 2000.† Internationalization and Firm Risk: An Upstream-Downstream Hypothesis†, Journal of International Business Studies, 31, 4; 611-629. Lee, K., and C.Y. Kwok, 1988. â€Å"Multinational corporations vs. domestic corporations: International environmental factors and determinants of capital structure†. Journal of International Business Studies, vol 19, pp. 195-217. Matsusaka. J, and V. Nanda, 1997, Internal capital markets and corporate refocusing, Working Paper, University of Southern California. Reeb, D.M. and C. Kwok and H. Y. Baek, 1998. â€Å"Systematic Risk of the Multinational Corporation†, Journal of International Business Studies, Second Quarter. Reeb, D.M., S.A. Mansi and J.M. Allee, 2001. â€Å"Firm internationalization and the cost of debt financing: evidence from non-provisional publicly traded debt†. Journal of Financial and Quantitative Analysis 36, 395–414.Chkir Cosset (1999) Scharfstein, D.S, 1997, The dark side of internal capital market II, Working Paper, MIT press.

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Contain communism Essay Communism had always posed a threat to the interest of the U.S. and their attitudes towards the U.S.S.R. had proved they had not entertained the idea of communism much. But it was not until February 1946 did it all come out and the U.S.A began to act towards containing communism. The policy of containment meant the U.S. actively prevented the psreading of communism.There were several ways with which the U.S. tried to contain communism some of which were futile and others effective. However, for every move the U.S. made the U.S.S.R. had a retaliation. One way with which the U.S. tried to contain communism was with the use of the atomic bomb. The dropping of the atomic bomb in Hiroshima was a method that was used to bring the war between the Japanese to a quick end with few loss of American lives. Described by Truman as the greatest thing in history the bomb had a very devastating effect taking up to 70 000 lives. 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Ofcourse the U.S.S.R. reacted negatively to this and also formed the comecon which organised economic assisstance to the countries of eastern Europe. But unfortunately this was no match for the Marshall plan. Added to this, in Germany, the Yalta and Potsdam agreements had stipulated that Germany be divided into two buffer zones. The western zone was to be under the supervision of the western powers while the eastern zone was under the U.S.S.R. However, in the eastern region, the U.S.S.R. continued taking reparations from Germany because of the damages of world war 2 where as, The U.S. kept putting money into the western zone. Soon it became obvious that the western zone was flourishing compared to the eastern zone. This caused the Berlin blockade of 1948-49. The U.S.S.R.s attempt to divide the eastern zone from the western zone. But this was where the Marshall plan and the iron fist came into play. Truman through the approach of the iron fist refused to give into these manouvres of the U.S.S.R. And with the money from the Marshall plan, the west were able to supply aid to Berliners, they flew food and supplies to them through the Berlin airlift and they were able to provide to over 2 million Berliners. The result of this was that Stalin had to give in and brought down the Berlin blockade by May 1949. A successful combination of the iron fist approach and Marshall plan, the west were able to gain an initiative giving the situation that happened in czechoslovakia and other east European countries. Another successful means of containing communism was the Truman doctrine.In February 1947, the British warned the U.S. that they could not keep their troops in Greece any longer which they had been in since 1944. But after the second world war, the British government began to feel the effect in their economy as they owed 3000 million pounds. This scared Truman because he believed communism was taking over and so by March 1947 he issued the Truman doctrine that specified that any country that had a democratically elected government and was fighting off communism would be given militarial support. And so with this, support from America was given to Greece and the communists were defeated. Stalin, however saw this as U.S. imperalism although he had no retaliation for this because in the first place, he had kept an agreement with Churchill that Greece was an area of British influence. None the less, the U.S. were still able to fight off communism in Greece. These were some of the ways the U.S. had contained communism or tried to.Through militarial means, that is the Truman doctrine and financial mean such as the Marshall plan. And also through propaganda, when they tried belittle the communists because of their use of salami tactics. They also tried the use of terror which was the A-bomb but that proved unsuccessful. Like some of the techniques used and on the other hand, others were quite successful indeed.

Ind Aff Theme Analysis Essay -- essays research papers

El Paso Community College English 1302 Research and critical writing  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   n  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   SHORT STORY PROJECT: IND AFF THEME ANALYSIS Extreme relationships often tend to be abusive in some way from one of the partners towards the other. Very marked age differences some times show a sense of immaturity or a parenting feeling, it is hard to assimilate to someone who in deed is very different to the other. Now when there is a certain dependence that is more than of love, like economic, intellectual, physical, social, progressive it can become very abusive on the depending person. It’s a case were almost anything has to be tolerated, because in deed, if one wants to keep enjoying from those benefits, he or she must lower their head and keep eating what ever is thrown at them. What starts out on a rainy day, seems to open way to the blindness of what’s to come. â€Å"I never got to see much of it cause of the rain†(151), focusing on the fact that she to couldn’t see much of her relationship blinded by the pressure that rained down on her also. There is a constant mentioning of Princip’s story (148), by both lovers; since her theses is based on that historic moment that would be: â€Å"the shot that lit the spark , that fired the timber, that triggered the†¦Ã¢â‚¬  (148). She seems to identify herself in a way with young princip, it’s how she pictures her self, and how she must look for that opportunity to just take control of the situation and just go for it. Our narrator has a direct conflict with Peter’s wife, more of a personal competition to were she considered to have the strong end†¦ â€Å" So far as I could see, it was no contest at all between his wife and myself†. In a sort of way she seems to feel guilty for the way she was slowly being left behind. The Archdukes wife can be represented as Mrs. Piper and how she mustn’t... ...s entertaining.(internet II) Michael Malone; New York Times, April 26, 1992, p. 11. I must agree with Mr. Malone since as much as you’d expect her to destroy peter in her story she gives him a sense of indifference, but one would come to expect that from him since through out the story she seems to plot out his character. Now the way that the story seems to not unravel till the end is interesting, it kind of takes you along a calm river ride with a smooth NIAGRA FALL ending. WORK SITED Weldon, Fay. â€Å"IND AFF† or â€Å"Falling out of love in Sarajevo† Compact Bedford Introduction to Literature. Ed. Michael Meyer. 5th edition. Boston. Bedford / St. Martin’s. 2000. Pages 146-151. INTERNET I RED MOOD http://redmood.com/weldon/biography.html INTERNET II Malone, Michael. â€Å"The Life Force Has a Headache.† The New York Times p.11 April 26, 1992 Criticism about: Fay Weldon. Texshare. E.P.C.C Libraries El Paso 28 February, 2001. Gale Literary Database

Current State U.S Economy

The current state of the economy is one that is concerning for almost all Americans. Though we are in the recovery phase businesses are still hurting, people are out of work, we are barely getting out of a depression etc. People are pointing fingers at what is the cause and who is to blame. What was once a strong healthy economy has now drastically changed. There are many economic indicators that are used to evaluate and provide an image of what is currently happening and what an outlook may be on the economy.Several of the important factors are the business cycle, consumer price index, stock prices, consumer confidence index, gross domestic product and unemployment rates. The overall picture of the economy is relevant to its current business cycle. The business cycle is the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of the cycle are growth, peak, recession, trough and recovery. As stated before we are in the recovery process but at a slow rate. One indicator is the Gross Domestic Product.The Gross Domestic Product (GDP) is the total market value of all goods and services produced, including total consumer, investment, and government spending, plus the value of exports, minus the value of imports. It moves with the economy and describes what’s happening right now. The GDP was at a huge decline a few years ago which resulted in our recession. Currently it has increased by 2. 7 percent which is indicating an improving economy. Another indicator is the Consumer Price Index. The Consumer Price Index (CPI) is a measure of the change in the purchasing power of currency and the rate of inflation.It shows the current price of a â€Å"basket† of goods and services in terms of the prices during the same period during the previous year. The purpose of the CPI is to show the effect of inflation on purchasing power. The â€Å"basket† of goods and services includes energy (gas prices) and food as well as other goods and services. The decline leads to deflation instead of inflation where consumers hold off on purchases in hopes of lower prices. Consumers are feeling pretty confident and spending has increased over time but not by much leading to the consumer confidence Index.The Consumer Confidence Index is a measure of how well the average American thinks the economy is doing and will do in the short-term. Stock prices are leading indicators of economic activity. If the market goes up and sustains upward activity this is seen as a good economic sign. The measure of stock prices comes from the Standard and Poor’s 500 index not the Down Jones Industrial Average. In September 2012 the S&P 500 index ended more than 25 percent above August. If current trends continue the economy will be vastly improved. The Unemployment rate is also used to understand an economy.The unemployment rate shows the economy's production, private consumption, workers' ear nings, and consumer sentiment. A lower unemployment rate translates into more employed individuals with paychecks, which leads to higher consumer spending, economic growth and potential inflationary pressures. High levels of unemployment are connected with lower incomes, lower spending, and economic stagnation. Our economy has seen the rates change up and down but the growing trend is our unemployment rate is lowering. All these indicators are used to describe the current economy.Though we are not at our highest point, we are slowly moving on the upward side. A pace that most don’t like but relative to the recession years ago it’s surly a vast improvement. November 30, 2012 U. S. Department of Commerce Bureau of Economic Analysis: U. S. Economic Accounts Retrieved on November 30, 2012 from: http://www. bea. gov/ Cunningham, Steven P. H. D The Consumer Sees Reason to Spend American Institute for Economic Research Retrieved on November 30, 2012 from: https://www. aier. o rg/article/7864-consumer-sees-reasons-spend

Essay on Shirley Jacksons The Lottery - Effective Use...

Effective Use of Character Names in The Lottery â€Å"The common curse of mankind, --folly and ignorance† (Shakespeare). Were he alive, William Shakespeare might fully endorse Shirley Jackson’s ideas as presented in The Lottery. The author, Jackson, very distinctly uses symbolic names for her characters to show the ignorance of the sacrificial lottery, which the small village holds year after year. These sacrifices, which used to be held to appease the god of harvest, have grown meaningless in their culture. Jackson uses the characters not only to visualize the story for the reader, but also each one has a meaning, which adds to the ultimate theme. One of the leaders and MOST important MEN of the town is†¦show more content†¦Mr. Summers, with all of his importance, had someone over him though. Mr. Graves, the postmaster, must have been of more importance and power than he because Mr. Summers had to be sworn in by Mr. Graves before he could have the right to be the official of the lottery. As the reader might easily derive, Mr. Graves symbolizes the sacrificial killing being caused by the lottery. His superiority over Mr. Summers is also symbolic. It shows how the sacrifice and the lottery in itself is more important than the new ideas presented by Mr. Summers and a few other villagers. But, Mr. Graves has many more villagers behind him sharing his views. One of these is Old Man Warner. Mr. Warner is the oldest man in town and, therefore, POSESED THE MOST knowledge of what the original tradition was all about. He lets us know that there has â€Å"always been a lottery† (77). He is repeatedly shown â€Å"warning† the younger parents and the younger generation of what they are in for if they do away with the lottery. Hence, he gets the name Warner. He claims the â€Å"young folks† are a â€Å"pack of crazy fools† and that â€Å"nothing is good enough for them† (77). Jackson refers to him as â€Å"Old Man† Warner partly to show you his age and that he should know the most about the lottery. But, also partly to show that his oldness, his mindset that he is the wisest, is holding the community back from the goodShow MoreRelatedExpect the Unexpected1898 Words   |  8 PagesExpect the Unexpected What thoughts come to mind when you think of â€Å"The Lottery?† Positive thoughts including money, a new home, excitement, and happiness are all associated with the lottery in most cases. However, this is not the case in Shirley Jackson’s short story, â€Å"The Lottery†. Here, the characters in the story are not gambling for money, instead they are gambling for their life. A shock that surprises the reader as she unveils this horrifying tradition in the village on this beautifulRead MoreEssay about The Life and Literary Works of Shirley Jackson4264 Words   |  18 PagesShirley Jackson was born on December 14, 1919 to Leslie and Geraldine Jackson. Her surroundings were comfortable and friendly. Two years after Shirley was born, her family with her newborn brother moved from San Francisco to Burlingame, California, about thirty miles away. According to her mother, Shirley began to compose verse almost as soon as she could write it (Friedman, 18). As a chil d, Shirley was interested in sports and literature. In 1930, a year before she attended Burlingame High SchoolRead MoreAnalysis Of Jackson s The Lottery899 Words   |  4 PagesAnalysis of Jackson’s â€Å"The Lottery† In the story â€Å"The Lottery† by Shirley Jackson, we see the different literary elements she uses to unfold her story. Literary elements help readers to interpret and appreciate the works of a writer. In this Essay I will show you the three most prominent literary elements that were used, and how they add to the suspense, and surprise of the story. These literary elements are point of view, theme, and tone and style. The first literary element of this story isRead MoreANALIZ TEXT INTERPRETATION AND ANALYSIS28843 Words   |  116 Pagesor a short story. Events of any kind, of course, inevitably involve people, and for this reason it is virtually impossible to discuss plot in isolation from character. Character and plot are, in fact, intimately and reciprocally related, especially in modern fiction. A major function of plot can be said to be the representation of characters in action, though as we will see the action involved can be internal and psychological as well as external and physical. In order for a plot to begin, some