Comparison between a developing and developed country

Comparison between a developing and developed countryThe countries I choose to discuss atomic human action 18 chinaware representing the developing country and USA symbolizing the developed country.economic clay concerns with the production structure of a country. It excessively includes how to allocate the economic inputs, how to distribute the outputs between the citizens and how to consume goods and services in an rescue.(NA 2007)According to Gregory et al (2003), the economic system has quaternary dimensions decision- brighten structure, coordination mechanism, productive property rights and motivator system.Decision making concerned with by whom the decisions are carried out, industrial councils, the establishment, or private owners. In US, excluding only a few subject area industries, some decisions are decided by the private owners, however, in China, there are a lot of state-owned enterprises which make decisions under the influence of the governing body.Coordi nation mechanism is the path of obtaining information and how to office it to coordinate economic activity. The main forms of coordination contain planning and the market. In US, its coordination form is the market the market is clear, and the exchange of information is highly efficient. While, China has been through a long time of planning coordination, its form, although its government claims the market, is in an interim.Productive property rights is about who takes control of the output. In US, the ownership is protected by the constitution plot of land in China, they are owned by the public or by all the pieces in the society.Incentive system refers to the reward. There are two study base material (compensation) and moral (social prestige). In both countries, they have both incentive systems simultaneously since either one is enough.1.2 pecuniary system1.2.1 monetary system in USIn the US, its unit of money is dollar. Its central vernacular is Federal Reserve who is resp onsible for making decision concerning to the finance such as financial policy and the base interest rate. since Fed is independent of the government and its chairman has a term of 18 years, it may put focus in the long term. In US, there are many financial institutions such as banks, insurance companies, mutual funds, insurance companies and so on. The varied institutions designed many sorts of financial instruments circulating in the financial market in the US which make the US the most efficient financial market in the gentleman.1.2.2 financial system in ChinaIn China, its unit of money is yuan. Its central bank is Peoples bank of China(PBC). Compared to Fed, they have a same job including issuing currency, making financial policy and so on. However, since PBC is also a bit of the government, its independence is in doubt in some degree. In other words, PBC may play the government leaders opinions when they make their final decision. Chinese financial system is immature and sti ll in the progress of developing. In this way, the kinds of financial institutions in China are limited. There are no private-owned financial institutions in China and theres legal protection that financial institutions can only be emerged but no bankruptcy. The financial instruments are also limited. Time deposit, demand deposit, and treasury bills are individual investors primary choice. Until now, more and more people are taking part in the stock market or buying some fund.1.3 the unique feature-means used by the central to prescribe the economyIn China, when PBC wants to express its pecuniary policy, its main tool is to change the benchmark of deposit and lending rates. If PBC wants to adopt tightening monetary policy, it bequeath increase the benchmark rate, on the other hand, it will drop the rate when adopting expansionary monetary policy. However, the method has its own disadvantage its effect is so strong that it may hurt the development of the economy.In the US, when Fed wants to regulate the economy, its first option is open market operation. If they want to adopt an expansionary monetary policy, it will buy the treasury bills from the financial market and release more money in the circulation. While, when they want to tighten the market, it will sell its bills and get money in the circulation hind end to the Fed. By regulation this way, the Fed is able to regulate the economy more proficiently and accurately, and this method has the smallest negative effects to the economy.The main reason why China doesnt use open market operation very frequently is that its financial instruments are limited and its financial market is not mature enough to do it. The other reason is that Chinese government interferes with the central bank more compared to the US government to the Fed.Q22.1 A brief introduction to IMFIMF, short for International Monetary Fund, is the international organization aimed for supervising the worldwide system, especially financial sys tem. Its main targets are keeping an eye on exchange rates and balance of payments as well as aiding the developing countries financially and technically. (Wikipedia)This organization was conceived back to July 1944 when 45 governments held a meeting in the Mount Washington Hotel located in Bretton Woods in this way, this financial system later was called Bretton Woods system. It was formally founded on December 27,1945.2.2 Members of IMFAt the pedigree of its foundation, it had only 29 peniss and its influence on the global financial system was rather limited. However, as time goes by, its guess on the global finance even economy is increasing gradually the members it accumulated is more and more.It is not that easily be accepted as a member of IMF. The country or state has to take several(prenominal) strict steps before it is able to sign the IMFs Articles of Agreement. However, that effort is worth endeavoring every member has its own quota in it. The quota represents the stat us of the member in the organization since several crucial characteristics including the voting weight and allocation of SDRs are determined by the quota.The member who has the most quota in IMF has the greatest power in IMF. United States enjoys 15.82% while other members only get around 6%, or even less. In this way, the US has always been the country which is able to block a super majority on its own. This is also the point raised by many critics that how can IMF keep its right among so many members.2.3 the objectives of IMFThe fundamental task for the IMF stays the same as it was founded to supply financial aid to the countries in need.2.4 challenges faced by IMFThe financial crisis beginning in 2008 is so devastating that near every part of the world is strictly affected by it. IMF is also no exception. This crisis is also showing the world that globalization, if not controlled properly, may turn to be a disaster throughout the world and some international financial organizat ions, such as IMF, has to face some new challenges.According to the statement of an official in IMF, although the global economy would hit the second bottom since 2008, the whole world still has to face four crucial challenges the financial sustainability, employment crisis, repair of the financial organizations and global cooperation.2.4.1 financial sustainabilityFinancial sustainability can be represented as a mutual cartel between the government and its citizens on the policy. In this way, it is very critical when government is making policies in the recovery. To explicate it, lets make an example. When suffered from the crisis in effect(p) now, the countrys economy was destroyed nearly completely. In order to recover quickly, the government chooses the expansionary fiscal policy by increasing the government spending or decreasing the inflation rate. By doing this, the government wants to show the confidence that they want to encourage more investment to the citizens. The citiz ens, responding to the government, begin to invest more than before, since they have a faith in government. However, with the increase of investment, the government realizes that another problem is showing up the inflation rate is rising. In order to overcome inflation, the government has to increase the interest rate, which is a signal of bilk the investment. The citizens may feel confused by the governments changing policy, and may lose faith in it. If the trust between a government and its citizens is destroyed, the recovery is exclusively hopeless. However, usually the government is shortsighted and its lack of financial sustainability cannot support the recovery and even lose the best opportunity, it is the IMFs responsibility to help guiding the government and make sure that they make the right decision.2.4.2 employment crisisSince the financial crisis in 2008, many developed countries including USA and some major European countries are pathetic from the inordinately high unemployment rate. Mr. Obama, the president of United States, had promised that the unemployment rate of US would drop. However, until right now, the unemployment rate of US is still above 8%, and there is more rumor that this number will fly to 10% or higher. This phenomenal is very common among the other developed countries around the world. High employment is fatal to a countrys stability. Without a domestic stable economy, how can people around the world make sure of the stability of the economy? While creating a stable environment for the global economy is one of the objects of IMF, how to lower the unemployment and create more job opportunities become their challenges.2.4.3 repair of the financial organizationsAs it is well known around the world, five major investment banks disappeared in USA during the financial crisis. Affected by this, many other financial and nonfinancial organizations within and outside US were in risk of infection of bankruptcy. Since financial organi zations are the primary elements in the financial system, helping them repair from the crisis is necessary. However, despite the organizations, even some countries are facing bankruptcy themselves. Depending on the government may not be a very good choice. In this time, the job rests on the shoulder of IMF, an international financial organization, who is able to help national ones when they need it.2.4.4 global cooperationWith the pace of globalization, the cooperation within different countries is becoming more and more indispensible to ones own economy. The deadly financial crisis happened in 2008 was first ignited in the US, while, after a short time, this crisis was spreading around the whole world like a cancer. Until now, many parts of world are still suffering from it. From this crisis, it is widely realized that even it is caused by only one section of a country, the influence may be spreading far far way, just like the butterfly effect. Thus, in order to cope with it effici ently, every country should enhance their cooperation with each. To cooperate finely, there has to be an organization to regulate their behaviors and that organization is IMF. Now, how to help each member cooperation with others effectively and safely is the final but not the easiest challenge faced by IMF.2.5 my suggestionsWhen facing these new challenges, I have several suggestions for the IMF.First of all, I suggest that IMF should guide those countries who have the most serious debt problems, even by exempting from a certain amount of heavy debt. Only by doing this can help them stabilize the domestic environment within the countries.Another suggestion from me is that IMF should appeal that every member enhances its cooperation when making policies. We must abandon the way of recovery based on hurting the other members economy such as the protection to local product by putting more indebtedness on the imports.NA (2007). economic systems, The New Encyclopedia Britannica, V. 4, p . 357.Gregory et al(2003). Comparing Economic Systems in the Twenty-First Century.