Income from the forest

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The Crisis of 2008 will probably be the most important macroeconomic event of our lives. So, it is very important for each of us to understand what happened, why things went wrong, and the lessons that need to be learned from the experience. This crisis is a story about lower mortgage credit standards, loans extended with little or no down payment, manipulation of short-term interest rates by the Federal Reserve System, and imprudent leveraging of mortgage-backed securities by Wall Street investment companies.

Initially, these actions increased the demand for housing and drove housing prices upward. But, it was only a matter of time until these conditions changed. High risk loans led to an increase in the default rate. The low interest rate policy of 2002-2004 raised prices in 2005. By 2006 housing prices began to fall. Those who bought houses with little or no down payment found that their mortgages were greater than the value of their houses.

The differences between countries are often not as great as the disparities within them: each nation is divided by a common economy. An analysis by The Economist suggests that the gap between poorer and richer regions increased during the downturn in some developed economies. And the income gap between richer and poorer areas is likely to open even further as government-spending cuts disproportionately affect poorer Regions.Regional data come from various sources. Comparing regions in different countries is tricky, because their size is quite different. We mainly use the OECD definition of “small areas”. For example, Britain is broken into more than 100 regions. However, in America data are available only on a state-by-state basis. Broad income numbers also ignore the fact that the cost of living is cheaper in rural parts than in big cities, which has the effect of exaggerating inequality. Urban areas are always likely to be wealthier than rural ones because of their higher productivity and their greater ability to attract companies and employees.There has been 22 recessions since 1921. The last major in the early eighties was studied by some economists. They looked at 600 businesses and found that companies that maintained or increased their advertising expenditure, saw higher sales growth during a recession and in the years that followed. In fact, the study found that these companies experienced a 256 % increase in sales compared to those who cut their budgets. The belief that it is smart to advertise in recession is reinforced by the fact that businesses that advertised during a recession saw their market share increase by 2.5 times. A survey of over 40,000 men and women, involved in the purchase of products and services over a five year period, also concluded that the market share went up in bad times when marketing efforts were continued

Spain’s trade plays a significant role in the nation’s economy, accounting for more than half of its GDP. The nation has, however, had a trade deficit persistently over the past few years, which stood at $77.5 billion in 2009. Spain’s weak trade scenario is due to several factors, predominantly the nation’s increasing reliance on imported petrol and decreased market competitiveness. Additionally, the steady decline of Spain exports is also attributed to the strength of the euro, since it was adopted by Spain for international trade, which has made Spanish exports more expensive.Spain’s top export and import partners are from the EU region. Key export commodities of the nation include motor vehicles, foodstuffs, medicines, machinery and pharmaceuticals. During 2009, Spain had net earnings of $215.7 billion from its exports. Spain’s imports were valued at $293.2 billion in 2009. The reason for such a wide gap between Spain’s exports and imports is the lack of resources in the nation, particularly oil. The nation imports 1.813 million barrels of oil per day.

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