Macroeconomics Proj_Paper 2.Songer.docx

Edgar may or may not realize that the gas prices are

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made aware of. Edgar may, or may not realize that the gas prices are affected by the price of oil, and the price of oil is affected by supply and demand. There is this seasonal effect on gasoline, summer versus winter, supply and demand. All of these things we are going to need to look into for Edgar, so he can account for all of the unexpected costs and sometimes lulls in his business. Another aspect to cousin Edgar’s business cycle will be his employment ups and downs, where, for example, he will need added employees during the summer months when he is busier and opened later. And of course, he will have to consider reducing his staff during those times when business is slower, and how best to hire year-round. In this type of industry, with hourly employees that are often seasonal as well, it is very important to learn how to “hire well” because the costs of training new hires can become very expensive if not done properly year after year.
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MACROECONOMICS PROJECT PAPER 2 4 There are so many things for Edgar to understand about what goes into the price of oil in relation to production, refinery and distribution costs, and corporate profits and federal taxes, for starters … and then, for his small business. The below figure 1 depicts global oil price increases against production. Figure 1 Figure 1. World crude oil production and Brent spot oil price, both based on EIA data. World oil prices started increasing about 2004 (Figure 1) http://oilprice.com/Energy/Crude-Oil/GDP- Growth-must-Slow-as-Oil-Limits-are-Reached.html
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MACROECONOMICS PROJECT PAPER 2 5 Figure 2 Figure 2. Growth in world GDP, compared to growth in world of oil consumption and energy consumption, based on 3 year averages. Data from BP 2013 Statistical Review of World Energy and USDA compilation of World Real GDP. (Figure 2) http://oilprice.com/Energy/Crude- Oil/GDP-Growth-must-Slow-as-Oil-Limits-are-Reached.html Unemployment There is another macroeconomic concept to consider for Edgar as he thinks about this endeavor, and that is the unemployment condition of the country, and the unemployment rate in this country is comprised of anyone 16 years or older, and is the number of unemployed workers as a percentage of the labor force. As was mentioned above, cousin Edgar would be most affected by seasonal employees, and there are, as it happens, four different types of unemployment: frictional, structural, seasonal, and cyclical. The most common type is frictional of course, for example when a person quits their job for a better one, although they are still
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MACROECONOMICS PROJECT PAPER 2 6 unemployed, and are part of the frictional unemployed type. Edgar found unemployment as a determinant, or primary indicator in this assessment, to be very interesting. He couldn’t quite understand how or why the unemployment numbers in this country could be a real determining factor when it came time for him to make a decision as to whether or not to open up his doors. So I felt it was important to take it a little further and explain to Edgar a little more about the other types of unemployment and why the health of the economy can be affected by how many people are working and or looking for work.
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