Tuesday, February 25, 2020

Microeconomic Phenomenon In Daily Life Term Paper

Microeconomic Phenomenon In Daily Life - Term Paper Example The paper tells how in January 25, 2011, Egyptians took to the streets in protest of dysfunctional political and economic systems in their nation. The youth took the forefront in revealing economic predicaments that had riddled their lives for a long time. In the process, members of the public engaged in confrontations with military personnel in a struggle which resulted in overthrow of Egyptian president Mubarak. The revolution period ushered in adoption of a new government system and new economic policies for Egyptian people. Immediately after the revolution, macroeconomic aspects of productivity had significantly reduced. The military regime that took over tried to restore economic sanity through measures which would take longer to yield the desired effect than expected. In this regard, Egyptian economic environment witnessed profound microeconomic predicaments in the period after revolution. Inflation effects are attributed to effects of revolution on Egyptian financial markets. In this context, Egyptian currency dropped substantially after the revolution to unprecedented low levels in the nation’s history. Egyptian net reserves for foreign currency featured at $ 30 billion in March 2011. This value represents a significant decrease since its reserves in January was approximately $33 billion. Based on theoretical effects of decreased dollar reserves within a nation’s economic system, Egyptian pound suffered a setback in value. Like most nations across the globe, Egyptian central bank has no mandate to depreciate the US dollar value. In this case, the only option to achieve a desired micro-economic trend would be to reduce purchasing power of affected currency. In the first attempt to improve the situation, Egyptian central bank purchased more pounds into their reserve stocks. These efforts fell into dead ends after dollar reserves hindered this tactical move. As a contingency plan, Egyptian central bank deliberately left deposit rates as 8.25%, while lending at a 9.75% for approximately 12 hours every week (Fraser 87). In practical application, these low interest rates were supposed to improve Egyptian currency value in order to reverse negative trends within the financial markets. Immediately after the revolution, foreign investors under sponsorship of the European Union staged a world economic summit in Alexandria. The summit aimed at addressing economic effect of revolution and increasing inflation, whi ch posed