Is It Right to Set up Shop in France?
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Understanding Frances economic performance is best aided using a model as shown in figure 2, page . This model is called the Aggregate Demand and Aggregate Supply Model. Aggregate Demand is used to represent the total level of spending on the goods and services produced within the country over a given period of time and it consists of four elements: consumer spending on domestically produced goods and services, investment expenditure within the country by firms, whether on plant and equipment or on building up stocks, government spending on goods and services (such as health, education and transport) and the expenditure by residents abroad on this countries exports. (Sloman, J) The Aggregate Supply is the number of people willing and able to work at different average real wage rates. (Sloman,J)
The model (figure 3), can demonstrate certain events that can affect an economies performance, for instance in the case of Demand Pull, inflation, being the measurement of the annual percentage increase in prices. (Sloman, J), in Figure 3, AD shuffles right to AD2 and our result is that GDP(Gross Domestic Profit) rises, inflation rises and UIE( Unemployment) lowers and if we reverse the diagram around as shown in Figure 4, we can see that the shift in the curve is to the left or backwards and so GDP would lower, inflation would lower and unemployment would rise.
Every business takes participation in the business cycle. This is evident in the graphs shown from Figure 6 to Figure 9. They show that over the long term, economies usually display an underlying positive rate of growth, sometimes known as the trend growth rate. A variety of different economic indicators shows cyclical movements of expansion and contraction in economic activity over time. Some of these indicators rise in periods of economic expansion. They are known as “pro-cyclical” indicators and include the rate of growth of consumer spending, job vacancies and investment. Other indicators (the so-called “counter-cyclical” indicators) fall in periods of economic expansion, such as unemployment and the number of bankruptcies. As demonstrated by these diagrams, a business always has its ups and downs in the economic world.
The data shown in the graphs Figures 6, 7 & 8, shows the trend of the business cycle rather well. We can see that in the time period of 1970 to 1984 the trend in unemployment and inflation went along the same way. They both increased each year. However, from 1984 to 2006 as shown in Figure 7, shows the cyclical nature of unemployment, which is at an average rate of 9.93%.
Sarkozys Policies are aimed to help this problem of unemployment in France by taking a few steps. He wishes to become more selective with the immigration system and only allow those that are qualified to enter into the work place, thus hopefully resulting in less training or no training for staff as those entering the workplace will already be fully qualified. This would then mean the business expenditure would be reduced as not as much money would be going on its training of employees. He also wants to take away the benefit and bonus scheme to all those whom turn down any work, thus hopefully resulting in more people saying yes to work as if not they will not be eligible to claim benefits. With this policy he hopes that people would not have the option of living off benefits, they should want to work or have to work in order to get money to live and eat etc. Sarkozy has also proposed that there will be a 4% drop in taxes, thus again trying to influence those to work rather than become unemployed as if there was a drop in taxes people would work more as less money is taken out of their pay salaries by the tax man as we all know how discouraging it can be when you receive a pay slip and find almost as much has been taken off you as your paid just in tax. He also has said that people will be able to work more than the average allowance of 35 hours a week, hoping to keep people in jobs, and reduce the unemployment of younger people. If people are allowed to work over the age of 65 he hopes older people will stay in work, thus then giving the younger people more experience with those who have been in the job many years. All