Currency Wars and the Making of the Next Financial Crisis in the Global Economy
April 3, 2025
The Recent Currency Wars The recent drop in the value of several emerging market currencies coupled with the fact that the BOJ (Bank of Japan) has embarked on extreme monetary stimulus and the US Federal Reserve’s unlimited bond buying spree have rekindled fears of a currency war among the currencies of the world. Added to…
What is Capital Account Convertibility ? Capital Account Convertibility means that the currency of a country can be converted into foreign exchange without any controls or restrictions. In other words, Indians can convert their Rupees into Dollars or Euros and Vice Versa without any restrictions placed on them. The reason why it is called capital…
The global financial system is in the middle of a manufactured boom. Earlier, the economies would boom on their own based on the underlying fundamentals. However, in the present scenario, the boom is 100% manufactured by central bankers that are using every trick in the book and some more to create the perception that the…
Managerial Economics deals with allocating the scarce resources in a manner that minimizes the cost. As we have already discussed, Managerial Economics is different from microeconomics and macro-economics.
Managerial Economics has a more narrow scope - it is actually solving managerial issues using micro-economics. Wherever there are scarce resources, managerial economics ensures that managers make effective and efficient decisions concerning customers, suppliers, competitors as well as within an organization.
The fact of scarcity of resources gives rise to three fundamental questions-
To answer these questions, a firm makes use of managerial economics principles.
The first question relates to what goods and services should be produced and in what amount/quantities. The managers use demand theory for deciding this.
The demand theory examines consumer behaviour with respect to the kind of purchases they would like to make currently and in future; the factors influencing purchase and consumption of a specific good or service; the impact of change in these factors on the demand of that specific good or service; and the goods or services which consumers might not purchase and consume in future.
In order to decide the amount of goods and services to be produced, the managers use methods of demand forecasting.
The second question relates to how to produce goods and services. The firm has now to choose among different alternative techniques of production. It has to make decision regarding purchase of raw materials, capital equipments, manpower, etc.
The managers can use various managerial economics tools such as production and cost analysis (for hiring and acquiring of inputs), project appraisal methods( for long term investment decisions),etc for making these crucial decisions.
The third question is regarding who should consume and claim the goods and services produced by the firm. The firm, for instance, must decide which is it’s niche market-domestic or foreign? It must segment the market. It must conduct a thorough analysis of market structure and thus take price and output decisions depending upon the type of market.
Managerial economics helps in decision-making as it involves logical thinking. Moreover, by studying simple models, managers can deal with more complex and practical situations. Also, a general approach is implemented.
Managerial Economics take a wider picture of firm, i.e., it deals with questions such as what is a firm, what are the firm’s objectives, and what forces push the firm towards profit and away from profit. In short, managerial economics emphasizes upon the firm, the decisions relating to individual firms and the environment in which the firm operates.
It deals with key issues such as what conditions favour entry and exit of firms in market, why are people paid well in some jobs and not so well in other jobs, etc. Managerial Economics is a great rational and analytical tool.
Managerial Economics is not only applicable to profit-making business organizations, but also to non-profit organizations such as hospitals, schools, government agencies, etc.
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