Need two forum replies completed and accounted type of question. The forum replies should be 175 words with references each and be in a discussion format. The accounting related task is 250 words. Thanks
Task 1: 175 words with references
What is the Paradox of thrift? Is it real? Is saving good or bad?
Paradox of thrift is a Keynesian economics theory, which proposes that if everyone tries to save more during a recession, then aggregate demand will fall. (Vermann, 2012) I would say Paradox of thrift is real. To give an example let’s use the current economy, the economy took a hit because of covid-19, the idea that if people start saving money during this time it could drive down demand is very likely. Take a local store for example, people saving more money and buying less could drive the owner of this store to make changes based on less income, this could mean less workers or less pay which in turn means less money going back into the economy from those workers that are now making less or unemployed. In my opinion I would say saving is still good, yes you can see the example I just used and wonder why I would say that and think it’s bad, but I like the example in our reading “Was Keynes Wrong About Savings?” (Twiggs, 2012) which went more into details supporting why savings could be good. They used an example of a farmer saving to buy a new tractor, yes due to him saving and consuming less it brings down the income for consumer goods, however when he buys the tractor he will make up for that by driving up the income of the dealer and even it out. That tractor that he saved for allows him to produce more food driving up national income. Saving for something doesn’t mean the money won’t be put into the economy, it just means it may not be put into the economy right away. During a recession this may affect things, but during a normal economy I don’t believe saving is bad.
Give an example of the Paradox of thrift.
From my understanding of the paradox of thrift, if someone saved $100 for something during a recession. Let’s say that $100 was going to go into buying food at a farmers market, that’s now $100 that wasn’t given to a hard working farmer and at a farmers market that’s a lot of food not being bought. Due to this change there’s a few things that could happen. Due to the fact that the farmer’s now selling less crops and making less money you may see the farmer produce less crops to make sure that he doesn’t have too big of a supply and lose money, with less crops he needs less workers and equipment, people could lose there job on the farm. Another way they could go about the loss in money is to pay the workers less, which in turn means the workers now have less money to put back into the economy.
What is the reverse paradox of thrift?
Reverse Paradox of thrift is the idea that higher spending, from either private or public sources, raises actual sales, improves sales expectations, encourages firms to bring idle resources into use, expands output and employment, and creates income. (Muddy Water Macro, n.d.)
I learned what the paradox of thrift is, I had never heard of this before. I’ve never thought of the negative impact saving could have on an economy during a recession short term, really only ever thought about myself when it came to saving. It’s interesting to see the full impact that it could be having on our economy, though I don’t think this is fully the case unless a large amount of people are saving. How I can use this is by putting more thought into where I put my money, larger corporations may be able to handle people saving thus spending less there, however local businesses would be hit harder, this makes me think more about putting back into the economy in certain areas while still saving.
Task 2: 175 words with references
The Paradox of Thrift is a “theory that suggests that if people cut spending to increase the amount they save, then aggravate savings will fall because that money not being spent, is also being taken away from someone else’s’ income” (Muddy Water Macro.). Of course the Paradox of Thrift Theory is real, but in a certain way. For example if a billionaire was to save their money that would have some sort of shift in the economy, such as the banks channeling the saving into investment. However if I was to save money it wouldn’t be enough for banks to do anything. Having savings is a good thing, but within reason, you don’t have to save every penny you make, but definitely have a rainy day funds.
After reading the “Paradox of Thrift: Numerical Example” listed in “Interest Rates, Aggregate Demand, and the Paradox of Thrift” article that was provided, it really put in to perspective small parts of the larger scale. In a way I was thinking about this on a Macroeconomics point of view, by thinking about big picture ideas like banks and government. The example that was provided, put the theory in a Microeconomics perspective by talking about the consumer’s point of view. The consumer had financial gain from saving his money, but there was no net growth. An example of the Paradox of Thrift Theory happened 2008, during the great recession that succeeded the financial crisis (Onion, Sullivan).
The reverse paradox of thrift is when spending is an increased amount of consumption and spending, resulting in elevated sales and employment. An example of this into investment, are banks that invest in new technology, which lets us produce more. And even if this new technology destroys jobs, wages will drop, and businesses hire more people. In turn, “higher desire to spend can actually create new saving in an economy” (Muddy Water Macro.).
This week I learned about the Paradox of Thrift Theory, and how it’s about the under consumption and over saving of the economy. The theory is simple, saving money may be good for an individual, but if everyone does it society as a whole would be worse off. That individuals savings is someone else’s income, companies would obviously make less money if everyone saved, because spending would go down.
Task 3: 250 words
Career exploration and planning is a continuing theme in our curriculum.
1. Go to the UMGC Career Services webpage and explore all of the services available to you as a UMGC student.
2. Click on and explore the CareerQuest feature
1. Prepare a one-page report, single-spaced, with double spacing between paragraphs.
2. What is your experience with the UMGC Career Quest account system?
3. Explain how our course, ACCT 220 Principles of Accounting I, also known as Financial Accounting, relates to your academic (Receive 2nd b.s. Degree) and career goals (Move up in accounting field). The course objectives are listed below to help you consider this question.
define the fundamental principles of accounting to describe basic business transactions
identify and analyze basic business transactions to record them in an accounting information system
prepare financial statements and documents in the appropriate format
identify and communicate with users of accounting and financial information to facilitate analytical decision making