How Has Richmond VA Been Impacted by the Recession Research Proposal

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¶ … Richmond VA been impacted by the Recession

At issue here is the recession, and what it is doing to the town of Richmond, Virginia. Like many big cities and little towns throughout the country today, Richmond is suffering. it's difficult for people to pay their mortgages, and businesses are going under. Some of this is happening because of what are called 'intertemporal choices.' Intertemporal choices are things that have benefits and costs that are not immediate. They are spread out over time, and they are important. Often times, these are fairly common choices such as whether to have children, or which house to buy. Obviously, these are choices that have long-term implications.

Children are a lifetime investment, and a house is often a lifetime investment as well. According to the article "Intertemporal Choice" by George Loewenstein and Richard H. Thaler (1989), these choices are particularly interesting when looked at from an economic perspective. This is due to the fact that many economic theories have difficulty in testing the behavior of individuals. All human beings look at things in different ways, and because of this the predictions of what people may or may not do given a specific economic choice are often vague.

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The main question in the article is whether or not people reach a level of economic stability that has some equilibrium. It was the authors' desire to know how interest rates, length of loan terms, and other economic factors affect each individual's choice to buy specific items or save their money and wait until they felt they were getting a better deal. This question is significant because the economy as a whole is affected by what individuals do with their money.

Research Proposal on How Has Richmond VA Been Impacted by the Recession Assignment

In other words, if the economy is in a recession like the one we have now many people are hanging onto their money, and therefore businesses and others who rely on consumer spending look for ways to encourage individuals to part with their money. This was largely the reason why many car companies began to offer 0% financing, and why interest rates for important long-term investments such as home loans came down so drastically. It was an effort to stimulate consumer spending, and thus boost the economy. One only has to look at offers such as the ones made by car companies and lending institutions to see the significance of the question.

In order to study this particular research question, the authors looked at many different factors such as the return that people could get on their investments, whether or not spending money and saving money were in a state of equilibrium, and the effect that interest rates and the value of bonds have on consumer spending. They even examined whether or not the interest rates that consumers could receive were more important to then the length of the loan, or whether the reverse was true.

In order to determine the answer to the main research question of equilibrium, the authors presented evidence to show that lenders tended to offer fewer loans when interest rates were lower, consumers tended to invest more when the return on investment was greater, and expectations of what could be made in the future tended to cause consumers to invest more money. However, these same consumers also like to know that they will get a good return on their investment in the short-term as well, since consumers often do not like to leave large sums of money locked up for a long period of time, in case they would need this money for something else.

From what the authors conclude, it seems as though the answer to their question is that equilibrium is often reached. This does not necessarily mean that each individual consumer will reach a specific state of equilibrium between what they spend at what they save, for example. As for the economy as a whole, however, equilibrium is eventually reached, even if interest rates must come down for consumers to start spending money again, or if consumer spending is so heavy that interest rates can be safely raised without causing alarm. Whatever the case, the economy will always return in time to a natural state of equilibrium, and this is largely because of the intertemporal choices made by both consumers and businesses. This state of equilibrium, however, may take some time to reach. During the time that individuals are waiting for that equilibrium state, there may be ensuing panic and other serious problems, which is what is generally being seen throughout the country today.

Objective Statement

The objective of this particular study is to determine what the impact of the recession has been on Richmond, Virginia. The way to do that will be through a study of the statistics that are specific to that area, and also through a study of the people of that area and whether they feel as though they have been impacted by the recession and in what way. The examination of both of these things is critically important in order to make a thorough determination of whether Richmond is seeing serious recession impacts and how, specifically, it is being affected. The study will address these issues in the context of the overall recession that is gripping this country and the world today.

Scope and Limitation of the Study

The scope of this particular study is broad in the sense that there is much that is being written about the recession today. However, it narrows significantly when it comes to looking only at Richmond instead of the entire country. The problems of recession are serious, and they include homelessness, loss of employment, and an overall slowing of the economy. They also include problems with other countries when it comes to imports and exports, and people become discouraged, frightened, and hopeless. This leads to alcoholism, mental illness, and other difficulties.

Richmond, VA has been specifically impacted by the recession. In one year, with data ending in April of 2008, employment growth slowed in the state by one-half of one percent (the Housing Recession, 2008). Home sales also dropped by 15% in 2007, and home prices fell as well, which is something that they had not done in thirteen years (the Housing Recession, 2008). Building permits for single-family homes were on the decline, and job growth in the construction industry and others in projected to continue to decline (the Housing Recession, 2008). It looks as though Richmond and the rest of Virginia are easily joining the rest of the nation in serious economic problems.

The good news for Virginia, however, is that the state is lower in the number of foreclosures than many states, with only 6.7 foreclosures for every 10,000 people in the state (the Housing Recession, 2008). Employment overall also grew slightly in some areas, but technology industries lost out. Since many of these companies pay wages that are higher than average, that loss hurt the city of Richmond and the state of Virginia as a whole. In 2007, Richmond had the best wage and salary growth of any of the metro areas in the state, but the entire state is now trending downward, just like the rest of the nation (the Housing Recession, 2008). Essentially, everything that is being seen throughout the United States is being seen in Richmond, VA, as well. Even large, metro areas that previously had a lot to offer to both residents and visitors are struggling to keep their businesses afloat in these tough economic times.

Limitations of the study include the fact that there is not that much specific info on Richmond, as most studies are either geared toward the United States or toward the Commonwealth of Virginia as a whole. Another limitation is that the recommendations that are addressed here might not be applicable to other cities and states because every place is unique. What could be done for Richmond, VA, might not work in Phoenix, AZ, Seattle, WA, or Atlanta, GA, for example.

Current Trends to Correct the Problem and Recommendations of Same

There are certainly other cities that have gone through - and are going through now - similar problems. It is also true that recessions have taken place and have had to be addressed in the past. With this being the case, past history can be looked at to help determine what should be done now and in the future so that the recession does not remain prolonged. In the spirit of that, there are several questions that can be asked and answered to shed greater light on where things stand at this moment.

What is the government doing to help the economy? The government is doing something unprecedented in the wake of the current recession. They are lowering interest rates, and actively using their fiscal policy to try to control the extent of recession that the country falls into. Usually, all attempts at stimulating the economy through the use of fiscal policy have been resisted, but this year is different. It was… [END OF PREVIEW] . . . READ MORE

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