Prime Lending Rate

Prime interest rate, or Prime Lending Rate, is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i. e. , those with high credibility, though this is no longer always the case. Some variable interest rates may be expressed as a percentage above or below prime rate. The problems for banks holding government debt that can’t be paid is exactly the same as banks holding mortgage debt – and, even worse, derivatives apparently backed by that mortgage debt – that can’t be paid.

The banks that hold that debt are forcing governments not to force them to “mark to market” assets that were possibly once worth something, but are now relatively insignificant. This is enabling those Too-Big-To-Fail banks to pretend they are still in good shape. In fact, they are in very bad shape, but don’t have to admit it, so their stock prices remain exaggerated- and the weakest of them avoid bankruptcy. The US chose to deal with its catastrophe by mimicking the Japanese response.

Now, it seems, Europe is doing the exact same thing: bailing out the banks. The governments are becoming weaker and direction-less just at the moment crucial action is needed. Previously, in North American banking, the prime rate was the actual interest rate although this is no longer the case. The prime rate varies little among banks, and adjustments are generally made by banks at the same time, although this does not happen with frequency. The prime rate is currently 3. 25% in the United States. Canadian prime rate is currently 2. 25%.

Gross National Product(GNP ) is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. Essentially, GNP measures the value of goods and services that the country’s citizens produced despite of their location. GNP is one measure of the economic condition of a country, under the assumption that a higher GNP leads to a higher quality of living, all other things being equal.

GNP/capita is a measure of average national output. There are at 2 least two kinds of problems with this as a measure of individual incomes: 1 Problems of measurement. Non-monetized activities may be inadequately estimated (e. g. the products of peasant agriculture) or excluded (e. g. domestic work maintaining the home). 2 Problems of conceptualization. GNP/capita is a simple average of output divided by number of people. So it does not say anything about the distribution of national income between rich and poor.

There are several different ways of comparing GNP/capita. It is measured in constant 1995 US dollars. This means that national incomes are compared using foreign exchange rates (rather than the purchasing power of local currency; we have a separate presentation looking at GDP/capita measured using purchasing power parity. Constant dollars means that an attempt has been made to remove the effects of changes in the value of money from these data. These data come from the World Bank’s World Development Indicators 2001.

Gross domestic product (GDP) is defined as the value of all final goods and services produced in a country in 1 year. It is the market worth of all final goods and services made within the borders of a country in a year. It is often definitely interrelated with the standard of living, even if its use as a stand-in for measuring the standard of living has come under increasing disapproval and many countries are actively exploring alternative measures to GDP for that purpose.

GDP can be determined in three ways, all of which should in principle give the same result. They are the product (or output) approach, the income approach, and the expenditure approach. The most direct of the three is the product approach, which sums the outputs of every set of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, hence the value of the total product must be equal to people’s total expenditures in buying things.

The income approach works on the principle that the incomes of the productive factors must be equal to the value of their product, and 3 determines GDP by finding the sum of all producers’ incomes. Countries with higher GDP may be more likely to also score highly on other measures of welfare, such as life expectancy. However, there are serious limitations to the usefulness of GDP as a measure of welfare: GDP takes no account of the inputs used to produce the output.

For example, if everyone worked for twice the number of hours, then GDP might roughly double, but this does not necessarily mean that workers are better off as they would have less leisure time. Similarly, the impact of economic activity on the environment is not measured in calculating GDP. Comparison of GDP from one country to another may be distorted by movements in exchange rates. Measuring national income at purchasing power parity may overcome this problem at the risk of overvaluing basic goods and services, for example subsistence farming.

GDP does not measure factors that affect quality of life, such as the quality of the environment (as distinct from the input value) and security from crime. This leads to distortions – for example, spending on cleaning up an oil spill is included in GDP, but the negative impact of the spill on well-being (e. g. loss of clean beaches) is not measured. For example, in the 19th century, recessions frequently coincided with financial crises. Because of the great changes in the economy over the centuries, it is difficult to compare the severity of modern recessions to early recessions.

Recessions after World War II appear to have been less severe than earlier recessions, but the reasons for this are unclear. The Depression of 1893 was one of the worst in American history with the unemployment rate exceeding 10% for half a decade. 4 REFERENCES Wheelen, T. L. , & Hunger, J. D. Strategic management and business policy (11th ed. ). (2008) Munner, M. Personal transformation as leverage for organizational transformation. (2007) Zoller, H. Globalization and organizational transformation (2007)