Two of the key supranational institutions, the International monetary Fund (IMF) and the World Bank, were established following a conference of leading countries held at Bretton Woods in the USA in 1944 to establish a post-war framework to facilitate currency and economic stability. The IMF now has nearly 200 member countries. Both organizations are centered in Washington. The objectives of the two organizations were always clearly delineated. The IMF was intended to provide relatively short-term financing to stabilize economies that had got into trouble with their foreign currency debts and reserves. The World Bank to provide long-term financing to support development.
Both organizations have their own agendas and this has led to significant controversy over their roles, objectives and policies. I will tr y to avoid being judgmental and simply describe what their principal objectives are and how they seek to achieve them. In this day and age it is usually safer to talk about sex than it is about politics. Most people are more interested in the former than the latter in any case.
The third key supranational financial institution is the Bank for International Settlements (BIS). This is based in Basel, Switzerland and its establishment predates that of the IMF and World Bank.
Posts Tagged ‘finance’
Bretton Woods
Tuesday, October 20th, 2009Market supply schedule
Sunday, September 13th, 2009How will producer-entrepreneurs respond to a change in product price? Other things constant, a higher price will increase the producer’s incentive to supply the good. Established producers will expand the scale of their operations, and over time new entrepreneurs, seeking personal gain, will enter the market and begin supplying the product, too. The law ly states that there is a direct (or positive) relationship between the price of a good or service and the amount of it that suppliers are willing to produce. This direct relationship means that price and the quantity producers wish to supply move in the same direction. As the price increases, producers will supply more-and as the price decreases, they will supply less.
Like the law of demand, the law of supply reflects the basic economic principle that incentives matter. Higher prices increase the reward entrepreneurs get from selling their products. The more profitable producing a product becomes, the more of it they will be willing to supply. Conversely, as the price of a product falls, so does its profitability and the incentive to supply it. Just think about how many hours of tutoring services you would be willing to supply for different prices. Would you be willing to spend more time tutoring students if instead of $5 per hour, tutoring paid $50 per hour? The law of supply suggests you would, and producers of other goods and services are no different.
Because there is a direct relationship between a good’s price and the amount offered for sale by suppliers, the supply curve has a positive slope. It slopes upward to the right. Read horizontally, the supply curve shows how much of a particular good producers are willing to produce and sell at a given price. Read vertically, the supply curve reveals important information about the cost of production. The height of the supply curve indicates both (I) the minimum price necessary to induce producers to supply that additional unit and (2) the opportunity cost of producing that additional unit. These are both measured by the height of the supply curve because the minimum price required to induce a supplier to sell a unit is precisely the marginal cost of producing it.