Management Accountants As Strategic Partners University Essay Example

Introduction

Large companies and corporations in different countries can be extremely dissimilar in terms of preferred practices and accepted values. Nevertheless, when it comes to the key similarities between them, it needs to be said that the work of every corporate management team is aimed at leading a company to success.

The latter, in its turn, can be measured in numerous ways because it is possible to make a conclusion concerning a company’s business performance based on its financial statements, profitability, the level of client satisfaction, asset growth rate, or customer growth.

Achieving these goals requires the concerted efforts of numerous specialists, and corporate management teams in the United States and all over the world try to establish such management systems in which information is easily distributed among employees on different levels of the organizational hierarchy. At the same time, due to a high level of responsibility, members of corporate teams should be able to retrieve any information at any level in order to take well-timed actions and improve a company’s corporate strategy. Helping their companies to retain and improve competitive advantage, management accountants remain important strategic partners in management teams of the American-based corporations.

Management Accountants: Responsibilities and Impact

Reporting and Revenue Forecasting

The position of a management accountant is focused on providing the most relevant information concerning sales, operations, costs, performance, or the feasibility of new projects to the senior management for strategic and decision-making purposes. Discussing the role of management accountants in large organizations in the United States, many researchers consider them to be the key specialists who facilitate the work of upper management, and this is why they are required to have high moral and ethical standards (Ghose 85). Creating detailed reports based on the specific needs of management teams, management accountants provide them with commercial advice that can contribute to the development of alternative strategies.

The job responsibilities of management accountants are strictly interconnected with commercial and financial decision-making, and many specialists believe that management accountants cannot be defined only as facilitators. In fact, it is believed that the importance of these specialists’ work has increased due to the trend of economic globalization.

Taking into account the changing business environment and the growing costs of mistakes, the degree of responsibility associated with the position under consideration has increased, and, to some extent, modern management accountants are regarded as individual decision-makers. The key tasks that management accountants in the United States are supposed to fulfil include updating budget assumptions, reviewing the roadblocks to financial success, developing budget recommendations for various accounting periods, and making income projections to support or improve the plans of the senior management.

Internal Audits

Apart from working on different reports that indicate possible outcomes of current financial decisions, financial feasibility of new projects, or analyze costs associated with alternative strategies proposed by the members of management teams, management accountants are required to conduct internal audits. In order to fulfill the task under consideration, management accountants use various strategies that always include key components such as creating an audit schedule, organizing meetings, conducting fieldwork, drafting a report, putting it together, and presenting the findings.

After the final meeting with the members of an audit committee, management accountants are to present the findings to other members of management teams who can use them to strengthen the internal control of business activities. The internal audit procedures conducted or supported by management accountants make the latter important strategic partners in corporate management teams. In fact, an internal audit involves a more in-depth analysis of business operations and the reliability of open access reports provided to prospective customers, investors, and business partners (Ramaswamy et al. 103).

More than that, such procedures can be used by management teams in order to define the degree to which specialists responsible for documentation follow internal regulations accepted in a company. To provide credible information on these aspects of organizational practice, one should have a comprehensive knowledge related to certain business areas and be aware of the internal challenges faced by a company.

The necessity to focus on potential and actual problems related to the financial performance of their companies is among the key reasons why management accountants are ranked among the most well-informed specialists in terms of trade secrets and proprietary information. The high degree of responsibility, together with numerous ways to use management accounting reports for decision-making purposes, makes specialists fulfilling the above-discussed tasks indispensable and increases the impact that their decisions and analysis have on the strategy of an entire corporation.

Collaboration and Strengthening Organizational Hierarchy

The role of management accountants as important strategic partners of executive teams in American corporations can also be proved due to their ability to control financial specialists at lower levels of organizational hierarchy and improve their work. Supervising the work of these specialists and reporting the results of the analysis to the chief financial officers of their organizations, management accountants act as coupling agents between lower and higher levels of hierarchy, therefore strengthening it.

Thus, the responsibilities of management accountants in American-based corporations are numerous, and these specialists have to demonstrate a wide range of skills to make a positive contribution to the development of their companies. Among other things, management accountants are expected to possess well-developed leadership skills as their key responsibilities include leading the teams of accountants at low-level positions (Appelbaum et al. 30).

Modern researchers suppose that the work of managerial accountants will change a lot due to the impact of Big Data (Warren et al. 397). Broadly speaking, these specialists are charged with the collection and the organization of data on purchases and sales, the current costs of business operations, etc. The responsibilities of these specialists include data collection and preparing statements and reports that are to be presented to government supervisors, revenue authorities, prospective investors, and target customers who are interested in collaboration.

As contrasted with them, management accountants fulfill their tasks based on the internal interests of their companies, and the emphasis is put on presenting financial data in perspective. With respect to specialists who use financial data to develop information products to be used outside their companies, their activity is predominantly guided by the necessity to improve companies’ social image.

Management accountants in the United States and other countries strengthen their companies’ market positions, using a wide range of tools for analysis, planning, and forecasting. Among the most popular tools there are variance analysis, balanced scorecard, and various statistical methods that facilitate forecasting and help them to provide more reliable results. In their work, management accountants are sometimes required to collaborate with specialists from different departments, and the choice of partners depends upon the area of business.

For instance, when it comes to companies whose further development requires the use of specific technology, their intensive collaboration with specialists from ITC departments may be crucial to success. In its turn, such collaboration also facilitates the work of senior management.

Management Accounting and Business Values in the United States

The development of modern management accounting practices that are used in large organizations is believed to have started during the outbreak of the First World War (Quinn and Jackson 191). When it comes to the United States, at the very beginning of the twentieth century, there were significant changes related to the approach to financial resources management and cost estimating practices.

Management accounting in the United States and practices that management accountants use on a daily basis are expected to support the key values that guide the development and growth of American corporations. Among the most important values that impact the working practices in large organizations in the United States, there are flexibility, profit, and competition. Modern management accounting practices used in the United States help the members of corporate management teams to perform their tasks in an effective manner and make evidence-based decisions concerning further corporate development and strategies to increase profits.

In other words, the work of management accountants remains an important element that increases the effectiveness of the decision-making process on the highest organizational level of a company. The value system of American business is inextricably connected with the expectations of corporate management teams. When it comes to the importance of accounting managers, it needs to be noted that their work supports the key values in American business, providing their superiors with information and recommendations that help to increase profitability.

In terms of profitability that is emphasized in the majority of American corporations, management accounting allows defining business operations that are to be improved in terms of costs and profits. Another important value, flexibility, is also supported by management accountants and their working practices. Taking into account that large businesses in the United States and other countries should have clear development strategies, it is important for upper executive management to have a choice in terms of the directions of development.

The global trends and problems in the world of business are constantly changing, and it is crucial for large business players to be flexible and plan further development based on these changes and forecasts. Unlike financial information that is collected, organized, and reported just to present the results of operations, the work with management accounting information requires specialists to have future-directed thinking (Weygandt et al. 712). Management accounting information is not presented only by facts and details. It can include recommendations for further optimization of individual activities, budgeting recommendations, and rough plans for further business development (Appelbaum et al. 30).

Due to the thorough analysis of management accounting information conducted by management accountants, large business players in the United States are able to make important strategic decisions in a more rapid manner. Therefore, they become more flexible in the changing business environment.

In reference to another key value in the American business community that is presented by competition, it is pivotal to note that management accounting information that corporate management teams are provided with ensures companies’ competitive advantage due to its unique properties. As it has been mentioned, open access financial statements and reports are past-oriented as they provide the information on costs and revenues and compare financial results for various accounting periods (Ramaswamy et al. 103).

Such information usually aims to ensure business transparency and demonstrate the impact that a company has on society. Financial reports can be accessed by third parties, and the openness of information on operations and revenues remains one of the key factors that help them to define whether a business is promising. Therefore, financial statements are among the tools that help to attract new business partners, investors, and even clients. Unlike financial information, management accounting information should remain confidential, and proper information security measures should be implemented to protect it.

Management accounting information can be focused on specific tasks, products, and services, their strengths and weaknesses, or the feasibility of a business. Due to the character of such information, it is to be used only by the members of corporate management teams as it facilitates the decision-making process. Importantly, detailed budgeting analysis reports, feasibility studies, reports on mergers and their impact, and other types of documents based on management accounting information act as sources that help to increase companies’ competitive advantage as they refer to weak and strong business decisions. Therefore, the degree to which management accounting information is protected has a significant impact on companies’ competitive advantage and the opportunities for further development.

To sum up, the purpose of management accounting activities is strictly interconnected with the key values of the American business community, such as flexibility, competition, and profitability. Being future-directed, the reports created by management accountants (if requested by the senior management) provide valuable information that is used to facilitate the decision-making process, survive recent changes in the business environment, and increase the effectiveness and the profitability of operations.

Apart from that, various forecasting reports help management teams in the American-based corporations to consider current strengths and weaknesses that impact their businesses’ competitive advantages. Based on the role of such information in strategic planning, management accountants can be called important strategic partners in corporate America’s management teams.

Conclusion

In the end, management accountants can be defined as important strategic partners of corporate management teams in American-based corporations due to numerous reasons. The functions of specialists from corporate management teams are strictly interconnected with reviewing the specific findings of other employees to implement them into current strategies and gain a competitive advantage over other companies in the field. The structure of any large company in countries that demonstrate rapid economic growth helps the members of corporate management teams to make decisions based on materials, reports, and recommendations that are provided by other specialists.

The role of management accountants in this strategic partnership cannot be overstated as these professionals are responsible for numerous tasks. The responsibilities of these specialists include completing various reports that are used for decision-making purposes, checking the credibility of open access financial information, supervising the work of other accountants, reviewing costs, and reporting to the upper management. Due to all these tasks, management accountants present coupling agents between specialists at different authority levels, and this is why their work is extremely important for corporate decision-making processes.

In addition, practices utilized by management accountants on a daily basis support the key values that are often used to characterize the American business community: flexibility, competition, and profitability. Unlike open access financial data that can be used by third parties, management accounting information collected and analyzed by these specialists is future-oriented. Therefore, it allows defining potential sources of competitive advantage, adapting to ever-changing environments, and heeding past mistakes to achieve financial success.

Works Cited

Appelbaum, Deniz, et al. “Impact of Business Analytics and Enterprise Systems on Managerial Accounting.” International Journal of Accounting Information Systems, vol. 25, 2017, pp. 29-44.

Ghose, Keeron Sreyoshi. “Ethics in Managerial Accounting: Today’s Challenges in USA.” Journal of Law and Social Sciences, vol. 4, no. 2, 2015, p. 85.

Quinn, Martin, and William J. Jackson. “Accounting for War Risk Costs: Management Accounting Change at Guinness During the First World War.” Accounting History Review, vol. 24, no. 2-3, 2014, pp. 191-209.

Ramaswamy, Mysore, et al. “Is There Proper Presentation of Financial Data in Supply Chain Analysis to Support Effective Management Decision Making?” Issues in Information Systems, vol. 16, no. 1, 2015, pp. 102-111.

Warren, Donald, et al. “How Big Data will Change Accounting.” Accounting Horizons, vol. 29, no. 2, 2015, pp. 397-407.

Weygandt, Jerry J., et al. Financial & Managerial Accounting. John Wiley & Sons, 2015.

Economic Characteristics Comparison: UAE And India

About the Economies

The UAE

The UAE was established in 1972 after the merger of six states. The UAE has a vibrant economy. Its performance can be compared to nations in the European region. The country heavily depends on the production and sale of oil, other oil equivalent products, and global investment. Also, it has reported a steady growth of economic performance since its formation. Political stability has been experienced in the country over a long period. This can be attributed to measures that have been put in place by the government to ensure that the environment is suitable for development. For instance, the government has ensured that the Arab Spring unrest is not experienced in the country (Central Intelligence Agency 2015b).

The UAE is an open economy that is characterized by high per capita income and trade surplus. In recent years, the government of the UAE has been keen on diversifying economic activities. This is based on the fact that the economy depends on the production of oil and gas production. Thus, the government seeks to reduce the income generated from oil production to 25%. Further, the government is keen on improving infrastructure and creating jobs. To achieve this, the country has put in place measures such as zero tax rate and a free trade zone with the aim of attracting foreign investors. The UAE was hit by the global financial crisis because of its dependence on the production of oil.

The government responded to the meltdown by growing expenditure and improving the liquidity of the financial institution. The UAE is a member of the Gulf Corporation Council (GCC). When compared with other GCC members, the country has the second-largest economy after Saudi Arabia. Further, it has the most diversified economy with a highly developed infrastructure (Central Intelligence Agency 2015b).

India

India is not a fully open economy as compared to the UAE. The country is gradually moving from a closed economy to an open economy. In earlier years, the country operated as a self-sufficient nation. It did not engage in external trade. However, the economy was liberalized in 1997. Some of the liberalization measures that were put in place are the minimization of barriers to trade, privatization, and deregulation of industries. These measures sparked economic growth between 1997 and 2011. The economy of India is quite diverse. It depends on a number of activities ranging from agriculture, service industry, and handicrafts.

Further, the country highly depends on the service sector for economic growth and development. The country is also endowed with a large population of highly educated citizens. Therefore, it has become a key exporter of outsourcing and technology services. From the year 2011, the country reported a decline in performance. This can be attributed to a number of factors such as growth in inflation, less investment, and a lack of state commitment to respond to the global changes in the economy (Central Intelligence Agency 2015a). The country also faces a number of problems that have persisted from one decade to another. Examples of such problems are poverty, inefficient and inadequate generation of power, and corruption, among other problems. The country is ranked fourth and one hundred and sixty in the world based on the Gross domestic product (GDP) and GDP per capita, respectively (Central Intelligence Agency 2015a).

Variables

The selection of variables will be based on the existing economic models. Such models usually depict the relationship between two or more economic variables. An example of a model that will be used is the macroeconomic identity. The model is presented below.

Y = C +I + G + (X – M)

Where;

  • Y = GDP or national income
  • C = Consumption expenditure
  • I = investment expenditure
  • G = Government spending
  • X = Exports
  • M = Imports

Apart from the variables in this model, the others that will be analysed are saving, inflation, unemployment rate, and population.

Data

The table presented below shows the data for the two countries.

Subject Descriptor Units Scale 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
India
GDP
Gross domestic product, current prices U.S. dollars Billions 808.744 908.57 1,152.58 1,262.52 1266.249 1630.472 1826.811 1946.765 2117.279 2314.715
Gross domestic product per capita, current prices U.S. dollars Units 728.599 806.9 1,009.26 1,090.26 1078.577 1369.541 1513.618 1591.574 1708.501 1843.564
Imports and exports
Exports of goods and services Current prices, U.S. dollars Billions 155.927 191.4309 235.4816 297.9711 253.8782 358.2195 443.4501 475.4985 532.7628 601.238358
Imports of goods and services Current prices, U.S. dollars Billions 178.1262 220.1312 281.7506 361.9431 321.9734 429.4341 561.6845 605.8322 595.4017 669.7182869
Export – import Current prices, U.S. dollars Billions -22.1992 -28.7003 -46.2691 -63.972 -68.0952 -71.2146 -118.234 -130.334 -62.6389 -68.47992887
Exports of goods and services Percent of GDP 19.28015 21.06948 20.43089 23.60125 20.04962 21.9703 24.27455 24.42506 25.16262 25.97461709
Imports of goods and services Percent of GDP 22.02504 24.22832 24.4453 28.66824 25.42734 26.33802 30.74672 31.11994 28.12108 28.93307759
Volume of imports of goods and services Percent change 20.355 12.838 18.237 11.027 7.284 13.966 11.001 1.334 3.279 7.355
Volume of exports of goods and services Percent change 19.947 16.258 18.003 9.764 -0.347 19.533 12.924 3.705 6.284 9.488
Government spending
General government total expenditure Current prices, U.S. dollars Billions 214.73 241.90 307.30 363.34 369.92 457.79 502.77 545.29 586.27 637.89
General government total expenditure Percent of GDP 26.551 26.624 26.662 28.779 29.214 28.077 27.522 28.01 27.69 27.558
Consumption
Household final consumption expenditure, etc. Percent of GDP 57.5912 56.96102 55.69324 58.61217 57.17628 56.40401 56.3584 59.45364 59.17727 59.23644356
Household final consumption expenditure, etc. Current prices, U.S. dollars Billions 465.7654 517.5308 641.9069 739.9922 723.9941 919.6516 1029.562 1157.423 1252.948 1371.154844
Inflation
Gross domestic product, deflator Index 103.41 108.974 114.717 123.72 130.357 144.955 156.312 168.436 183.275 198.998
Inflation, average consumer prices Index 115.667 122.917 130.75 141.667 157.083 175.917 191.5 211.128 231.496 250.695
Others
Investment 276.089 320.7161 430.5678 433.5251 465.8277 565.8553 640.0598 700.777 759.6374 832.2789254
Total investment Percent of GDP 34.138 35.299 37.357 34.338 36.788 34.705 35.037 35.997 35.878 35.956
Total investment Current prices, U.S. dollars Billions
Savings
Gross national savings Current prices, U.S. dollars Billions 265.8099 311.4215 422.4883 402.5555 439.9202 513.6313 577.3088 626.2354 690.5717 766.471578
Gross national savings Percent of GDP 32.867 34.276 36.656 31.885 34.742 31.502 31.602 32.168 32.616 33.113
Saving-investment balance Current prices, U.S. dollars Billions -10.2791 -9.29467 -8.07956 -30.9697 -25.9075 -52.224 -62.751 -74.5416 -69.0656 -65.80734745
Unemployment % of total labour force 4.4 4.3 3.7 4.1 3.9 3.5 3.5 3.6 3.6 3.5
Population Persons Millions 1,110.00 1,126.00 1,142.00 1,158.00 1174 1190.524 1206.917 1223.17 1239.261 1255.565
United Arab Emirates
GDP
Gross domestic product, current prices U.S. dollars Billions 180.617 221.965 257.916 314.451 259.733 283.916 341.958 361.912 374.925 387.225
Gross domestic product per capita, current prices U.S. dollars Units 43,988.56 52,486.34 57,468.01 65,991.78 51269.91 54411.12 63625.69 65377.09 65755.27 65934.335
Import and exports
Exports of goods and services Current prices, U.S. dollars Billions 122.0708 152.337 186.6902 247.9981 206.8859 223.5948 309.8542 354.3661 368.9129 383.7649402
Imports of goods and services Current prices, U.S. dollars Billions 93.86248 112.8588 166.1342 219.0014 191.7053 205.1196 247.975 272.8061 291.206 303.5087214
Exports – imports 28.2083 39.47827 20.55601 28.99669 15.18059 18.4752 61.87925 81.55998 77.70692 80.25621879
Exports of goods and services Percent of GDP 67.58543 68.63111 72.3841 78.86702 79.65329 78.75387 90.61178 97.91498 98.39645 99.1064472
Imports of goods and services Percent of GDP 51.96769 50.8453 64.41406 69.64565 73.8086 72.24659 72.51621 75.37912 77.67046 78.38045616
Volume of imports of goods and services Percent change 14.368 8.267 35.907 22.364 -8.906 -1.544 9.209 9.778 4.972 5.74
Volume of exports of goods and services Percent change 10.41 11.239 12.846 12.647 -1.875 -4.176 10.462 6.792 6.067 7.556
Government spending
General government total expenditure Percent of GDP 15.153 14.687 15.599 17.831 27.232 25.701 23.883 24.113 23.182 22.681
General government total expenditure Current prices, U.S. dollars Billions 27.36889 32.6 40.23232 56.06976 70.73049 72.96925 81.66983 87.26784 86.91511 87.82650225
Consumption expenses
Household final consumption expenditure, etc. Current prices, U.S. dollars Billions 105.2531 127.7865 159.2367 192.8966 141.1357 166.8393 178.2126 173.9718 186.7333 196.716513
Household final consumption expenditure, etc. Percent of GDP 58.27419 57.57058 61.73974 61.34394 54.33876 58.7636 52.11536 48.07021 49.80549 50.8016045
Inflation
Gross domestic product, deflator Index 123.518 139.459 152.086 176.051 152.748 164.827 188.727 191.994 193.952 194.294
Inflation, average consumer prices Index 173.909 190.057 211.206 237.081 240.78 242.894 245.036 246.763 250.618 255.346
Others
Investment
Total investment Percent of GDP 19.242 18.215 23.783 22.532 20.762 21.658 21.746 23.33 21.412 21.242
Total investment Current prices, U.S. dollars Billions 34.75432 40.43092 61.34016 70.8521 53.92577 61.49053 74.36219 84.43407 80.27894 82.2543345
Savings
Gross national savings Percent of GDP 31.632 34.479 30.659 30.12 24.151 25.028 31.487 32.623 31.533 32.129
Gross national savings Current prices, U.S. dollars Billions 57.13277 76.53131 79.07447 94.71264 62.72812 71.0585 107.6723 118.0666 118.2251 124.4115203
Saving-investment balance Current prices, U.S. dollars Billions 22.37845 36.10039 17.7343 23.86054 8.802351 9.567969 33.31013 33.63248 37.94616 42.15718575
Unemployment, % of total labour force 3.1 3.3 3.4 4 4.2 4.2 4.1 4 3.8 3.7
Population Persons Millions 4.106 4.229 4.488 4.765 5.066 5.218 5.375 5.536 5.702 5.873

(Source of data – International Monetary Fund 2015; The World Bank Data 2015)

Discussion

Components of Aggregate Demand

GDP

The GDP of the two countries rose during the ten-year period. The GDP for India grew from USD808.744 billion in 2005 to USD2,314.715 billion in 2014, an increase of 186.21% (The World Bank Data 2015). In the case of the UAE, the value rose from USD180.617 billion in 2005 to USD387.225 billion in 2014, an equivalent of 114.39% (International Monetary Fund 2015). It can be noted that the overall growth in India was higher than in the UAE. Besides, the level of GDP in India is higher than in the UAE. Further, in 2009, the UAE had a drop in GDP. This can be attributed to the global financial crisis. In the case of India, there was no drop in the value of GDP.

However, the country experienced slow growth in the value of GDP in 2009. The trend of the values shows that the countries were able to recover at a faster rate from the crisis. In the case of GDP per capita, the countries reported growth over the years. The value of GDP per capita had a similar trend as GDP. However, the UAE had a high value of GDP per capita than India. This shows that the standard of living in the UAE is higher than in India. Even though the global financial crisis had adverse ramifications of international trade with a disproportionate impact on the economies of the UAE and India, there were a lot of positive developments happening in the two countries. Further, it is expected that the value of GDP and GDP per capita will improve in the coming years.

GDP.
GDP.

Consumption Expenditure

The household final consumption expenditure, measured as a percentage of GDP, comprises all goods and services bought by households. The value excluded the purchase of residential houses. In most economies, the consumption expenditure accounts for about 50% to 80% of the gross domestic product. In India, the consumption expenditure accounted for between 55.69% and 59.45% of GDP, while in the UAE, the range was between 48.07% and 61.34%. Further, it can be noted that the consumption expenditure as a percentage of GDP for India was fairly stable while that of the UAE declined. This implies that the over-reliance of the economy on oil dropped. The consumption expenditure in both countries accounts for more than half of the GDP. Also, there was a growth in consumption expenditure in both countries. The percentages show that consumer demand has a strong influence on the economic growth and development of both countries.

Development of both countries.

Development of both countries.

IInvestment Expenditure

This category gives information on the amount spent by the private sector on investment. In India, the value of this investment grew over the period. The total increase over the ten-year period was 201.45%. The percentage of investment GDP in this country remained fairly constant. The range of this value was between 34.138% and 37.357%. Thus, the growth of investment can be attributed to GDP growth. In the case of the UAE, investment grew by 136.67% during the entire period. The range of the proportion of investment to GDP was from 18.215 to 23.78. In both countries, it can be observed that investment dropped during the global financial crisis. Further, the expenditure on investment in India was higher than in the UAE. Further, the high proportions of investment to GDP can be an indication that the two countries are suitable for investment.

Investment.
Investment.

Government Spending

In the case of India, this expenditure grew by 197.07% during the entire period. On average, government spending contributes to about 27% of India’s GDP. In the case of the UAE, government spending grew by 220.90% over the ten-year period. In both countries, there was significant growth in government spending after the global financial crisis. This can be attributed to the fact that it is an expansionary fiscal policy tool used by various governments to stimulate the economy. Specifically, this tool cancels a reduction in consumer expenditure and investment, thus stabilizing the economy and increases GDP.

Imports and Exports

The final component of the aggregate demand equation is net exports, that is, the difference between the export and imports. In the case of India, the volume of imports and exports grew during the period. Further, the volume of imports of goods and services exceeded exports during the entire period. This implies that the country had negative net exports. Thus, the balance of trade contributed negatively to the GDP of the country. In the case of the UAE, the volume of imports and exports grew during the period. Further, exports exceeded imports. This shows that the country had a trade surplus. Further, it can be observed net exports grew from $28billion in 2005 to $80.26 billion in 2014. The contribution of the trade surplus to GDP grew from 15% in 2005 to 20% in 2014. Thus, the trade balance from the two countries shows that the UAE gained from international trade because of the production of oil, while India makes losses from international trade.

Others

Saving

All the components of aggregate demand function are exhausted in the previous section. Saving is a component of aggregate supply. This variable is of importance because the saving-investment balance is closely related to the trading balance. In the case of India, the saving-investment balance was negative, just like the case of net exports. Therefore, the country is likely to experience a capital inflow to enable India to buy foreign commodities. In the case of the UAE, the saving-investment balance was positive, as observed in the case of a trade surplus. Thus, the country will experience capital outflow to enable foreigners to purchase more of their commodities. During the global recession, there was a significant drop in saving-investment balance. This had an impact on consumer purchasing power.

Inflation

Inflation, as measured by the gross domestic product deflator and average consumer prices, grew during the period in the two countries. The inflation rate in India grew at a faster rate than in the UAE. However, the UAE has a higher level of inflation than India.

Unemployment rate

The unemployment rate is an important variable that should be analyzed in an economy. A high unemployment rate can slow down the rate of economic growth. The two countries seem to have an equal level of the unemployment rate. However, the data show that unemployment in India dropped during the period. The country experienced slight growth during the global financial crisis. In the case of the UAE, the unemployment rate rose by a larger margin than India during the global financial crisis. Further, it can be noted that the unemployment rate in the UAE took a much longer time to fall after the crisis. An increase in the unemployment rate can be attributed to a reduction in economic activities within a country. Thus, a country with a high unemployment rate is likely to have a low value of GDP.

Population

India has a higher population than the UAE. The population of India is more than 270 times that of the UAE. The population and its composition are significant variables in a country because they have a possibility of affecting GDP, GDP per capita, labor force, and government spending, among other variables. For instance, the data in the table above shows that India has a higher amount of GDP than the UAE. However, the population of India is higher than that of the UAE. Thus, the resulting GDP per capita of India is quite lower than that of the UAE. Further, it is important to evaluate the proportion of the labor force that is actively involved in economic activities.

In summary, the discussion above shows that the overall performance of India’s economy is higher than that of the UAE. Further, India depends on the service industry, while the UAE heavily depends on oil. Also, there has been a growth of performance in the two economies, and the trend is expected to persist in the future. Both countries experienced a slowdown in performance during the financial crisis, and they both recovered from this crisis.

References

Central Intelligence Agency 2015a, The world factbook: India.

Central Intelligence Agency 2015b, The world factbook: united arab emirates. Web.

International Monetary Fund 2015, World economic outlook database. Web.

The World Bank Data 2015, World development indicators. Web.

College Affordability In The United States

As the cost of education in the United States grows, more and more young people find themselves unable to pay for the degree. Hall mentions the fact that the cost of attending institutions doubled during 1980-1990 and experienced the same changes during 1990-2000 (par. 2). This fact helps to understand the range of the problem, as such tendencies are, unfortunately, not accompanied by the same volume of growing incomes among American average families.

Such a situation can cause serious complications for the future of US society. Cruz analyzes the problem of affordability of higher education and emphasizes its direct relation to the ability of the youth coming from low-income families to become a potential middle class (par. 3). The existence of this opportunity is of vital importance, as promoting the growth of the middle class is an essential step towards eliminating inequality among the population of the country (Cruz par. 15).

Student loans are not able to solve the problem, as after graduating from higher education institutions the students from low-income families find themselves severely in debt. Cruz gives an example of a 19-year-old student who has a partial scholarship and will still owe nearly seventy-five thousand dollars after graduation (par. 4). Even students with scholarships and part-time jobs are hardly able to manage to graduate from college or university without being in debt if their parents cannot provide corresponding financial help. Such situations are common all over the United States and can prevent potential students from regarding higher education as a considerable opportunity.

Analyzing the causes of the current process related to price rises in education and tendencies involved in it can help to reveal the possible solutions. The first cause of the process can be identified as reductions in spending on higher educations by state and federal governments. Hall mentions this tendency as the reason for transferring the costs to students (par. 3). However, the author emphasizes that there are many other factors, including huge spending for “athletic programs, extravagant recreational facilities, and specialized food services” (Hall par. 3). Such services appear to be luxuries, which are not essential for providing efficient education.

Therefore, spending on them could be reduced in the current situation. Besides, the author claims that universities might have a private interest in increased costs due to their inclination to promoting selectivity (Hall par. 3). Cruz mentions another problem causing the issue of costly education related to negative tendencies of investing a considerable amount of grant aid on wealthy students (par. 7).

Such actions can be considered inappropriate in the current situation, as benefiting families with low income should be the primary priority. Besides factors related to institutions’ programs and priorities, and economic factors can also be considered as the cause of low ability of students to pay for education. Hall emphasizes the contribution of economic crisis and corporate deregulation to the “income divide” causing reducing paying capacity of lower and middle class. The analysis of the causes of the crisis in the affordability of education mentioned above reveals the high importance of providing corresponding policies regulating the spending of the institutions and stimulating economic stabilization in the country.

The potential solutions should take into account both the interests of prospective students and educational institutions. Such a strategy will help to provide the appropriate level of supply and demand for higher education. Cruz suggests that federal policymakers should “lower the income caps for higher education tax credits and deductions” (par. 12). Hall also pays attention to the importance of federal regulation of the activities of institutions related to spending huge amounts of money for non-educational facilities, such as dining rooms or athletic facilities (par. 5).

Such services do not play an essential role in providing the functioning of educational institutions and can be regarded as providing extra opportunities for non-academic activities. As such activities are not directly related to the process of receiving knowledge by the students, policymakers should encourage the institutions to plan the distribution of investments based on the primary priorities, which include providing low-income students with the opportunity to get higher education.

The reductions in investing in this sector will help to use the saved money for grants and scholarships supporting the students with low paying capacity. Besides, Cruz states that instead of offering grants for elite students, the institutional policymakers should focus on providing the maximum range of opportunities for those categories of students who need the financial support most (par. 14).

Such a strategy will help to attract talented students who find themselves unable to pay for higher education. Both authors stress the importance of dealing with the problem of student loans and creating regulations making the institutions of higher education ensure providing the appropriate skills and career opportunities able to compensate the costs spent on education by the graduate. The analysis of the articles helps to identify current problems in American higher education related to the expensiveness of high education and inappropriate paying capacity of potential students, explore the major causes of the process, and find possible solutions for the existing problems.

Works Cited

Cruz, Jose. College Affordability: Damned If You Go, Damned If You Don’t? 2012. Web.

Hall, Amanda. College Affordability and the Growing Cost of Education. 2013. Web.