...Inflation and unemployment were not improved by monetary policy Abstract The global financial crisis made a long term negative effect on the economy all over the world as well as New Zealand. GDP and inflation decreased with a high level of unemployment rate. This essay is going to discuss the effect of the actions from reserve bank. According to their response, the IS-LM, AD-AS and Phillips models will be used to analyze the effect of change in OCR on economic activities. Furthermore, some previous literature will be used in this essay which is relative to some problem happened during the recession. Introduction There is a big impact on the economic environment following the 2008 financial crisis. New Zealand faced a negative effect on unemployment rate, income, inflation and output and etc. as an important part of developed country. The main aim of this essay is to investigate what monetary policy has been used in response to the recession and whether it is useful to make a significant recovery. The financial crisis can be seen as a very serious problem in New Zealand. The stock market got hit seriously because the investment, income, confidence, employment rate etc. all fall. During the recession, the unemployment rate rose from a low of 3.5% in December of 2008 to a high level of 7.3% in June of 2012. (TRADING ECONOMICS, 2013) The New Zealand GDP had a negative growth during 2008 and 2010 because many businesses shut down and the unemployment rate increased...
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...forces that determine the price levels seen in the economy. For example, microeconomics would access how a specific business could maximize its production so it could lower prices and compete more fiercely with its competitors. In order to come up with these solutions, microeconomics considers various variables such as the relationship of a firm with the market and the appropriate price of a product to maximize profits. On the other hand, Macroeconomics is a broader study that involves the economy as a whole, not just one particular company since it assesses entire industries. For example, macroeconomics covers subjects such as an economy’s GDP and how it is closely linked to unemployment rates, since they mutually influence one another. Besides from GDP, topics such as interest rates, economic growth, and inflation are very commonly studied in macroeconomics. Therefore, the main difference between microeconomics and macroeconomics is the extent of their spectrums. By that I mean that microeconomics deals with single markets or business entities whereas macroeconomics deals with entire economies and industries. Although these two...
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...ASSIGNMENT SHOPPING MANAGEMENT DURING RAMADAN MGT (101) SEC :- 06 KAZI RAYHAN SOBAHAN RABBI (2015-03-10-034) ZAHIDUL ISLAM (2015-02-10-217) In Bangladesh most of the people of its population are abided by the Islam religion . Massive amount of people pursue the Islam religion and in Islam the month of Ramadan is very holy and important to them because it is also known as the month of forgiveness. After a whole month of fasting finally the main occasion EID-UL-FITER comes and brings happiness among all. During this Ramadan people starts to get prepared to celebrate the EID with their family .In EID people celebrate the day by wearing different out fits and gorgeous dresses specially the children who likes to wear new cloths in this days, also in this month people mostly stays outside and likes to have a meal in famous food stalls or restaurants , in this time people who come to the cities from villages get prepared to visit their family members who lives in the villages and because of this they faces a huge struggling period to collect the tickets from the counters. Now we are about to concern about this following issue’s advantages and disadvantages :- 1. Shopping 2. Food 3. Transportations tickets. Shopping Advantages sellers point of view :- They do a lot of sells throughout this month. also the profit margin they get is very high on that time. They spend a lot of capitals to collect different and modern dress collections on publics demand...
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...Balance of Payments, Unemployment, Inflation and GDP. The research for this report has helped understand more about the economies of this world. Inflation Inflation is defined as the rate of the general level of prices for goods and services are rising, and, subsequently, purchasing power is falling (Investopedia, 2011). Comparing the two countries we were quite surprised about the outcome. Brazil: Between 1980 and 2010 the average inflation rate in Brazil was 445.98% (Trading Economics, 2011). This is an extremely high average inflation rate which displays a rather weak economy. The reason for this is the extremely high inflation rates between 1989 and 1994. Below is a table displaying the inflations rates of Brazil from January 2008 to the current date. As you can see there it is clearly shown when the economic crisis affected Brazil. The inflation rate in 2008 was 6.4% (Trading Economics, 2011). The high inflation rate was of course very convenient for government since; the Mint printed money around the clock, at a very low cost to the Treasury (v-brazil, 2011). In 2009, the inflation yet again decreased to a less severe level. The economy was slowly but surely recovering from the major economic crisis that hit the world in 2008. The government accomplished this through the increase of interest rates, which prohibits people from investing money. The government wants to take money out of the circular flow. In late 2010 the inflation rate yet again...
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...Policy: The relation between GDP, unemployment and inflation is theoretically straightforward: the higher GDP the lower unemployment and the more upward pressure on prices (at least to some extent). When the Obama administration came into office it was faced with a situation where unemployment was headed up and GDP down. To counter this - as we know - a massive stimulus package was put into place. Now that we are some 15 months into this stimulus package please provide your opinion on how well it is doing. Please give some consideration to: 1) was the stimulus necessary in the 1st place, 2) was it big enough to do the job, 3) was it too big because of the deficits it created. What if anything should the administration be doing now? This is an excellent question. As time passes, I wonder was the stimulus worth it? Are we better off? My overall assessment is that prices were inflated especially in the housing market and it was time that something occurred to bring them back down to reality. It was inevitable that the crash happened creating a windfall in the market. A chain reaction began and people started losing their jobs. In response to the decline in GDP and the rise in unemployment figures, President Obama was able to push through the American Recovery and Reinvestment Act. The act provided investment into infrastructure projects and provided capital to banks and the overall economy. My opinion of the stimulus is good. I feel that it helped in that the injection...
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...CASE STUDY H&M WORKPLACE Fire safety is a major issue in Bangladeshi garment factories. Poor electrical installations and bad maintenance often create significant fire hazards. In order to make a safe workplace the norm throughout the sector, we think that it is essential to involve all stakeholders such as the government, industry organisations, trade unions and other brands. This is why we developed two training films to increase fire safety awareness amongst employees at all levels in garment factories. We teamed up with 18 other brands and employer associations in the sector, BGMEA and BKMEA, to spread this training. According to BGMEA, more than 1,250 factories and 100,000 workers received the training. Based on a study that we conducted in 2011, we raised the concern of lapsed fire-safety licenses with the Government of Bangladesh and engaged the Bangladeshi University of Engineering and Technology as well as a specialist to assess the electrical installation in four factories. These assessments were finalised in spring 2012 and their results were presented to concerned stakeholders at a seminar in Dhaka. The most common shortcomings in regards to electrical safety such as poor-quality materials, poor maintenance and lack of proper electrician training were discussed. During the seminar, a number of actions were proposed, including introducing stricter legislation and inspections. In order to set a good example, we have stipulated that all our supplier factories...
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...Instructor Title Describe the terminology of macroeconomics including GDP, GNP, national income business cycles, monetary policy, fiscal policy, inflation and unemployment Macroeconomics is a broad sub-field of economics that establishes the behavior, outlook and structure, collective and established decision making system of an economy at large and usually involves national economies, regional and global economies with little or no involvement of the individual markets. Gross National Product is a determining tool in macroeconomics that measures a nation’s economy and status through international investments and residents working over-seas. GNP excludes any product values produced by foreign investors within the country. GNP is a great indicator in macroeconomics when assessing economic progress in comparison with Gross Domestic Income. (Clark & Montjoy, 2001) Macroeconomics uses GDP to determine the value of all market products and services produced within a given boundary usually a nation in a period of one year. At every stage of production, the value of all goods is added and the economic growth established based on the previously assessed standards. Macroeconomists explain that unemployment tends to reduce with a rising GDP rate since the output is increased and thus need for more skilled and unskilled labor force. Inflation gives an explanation on the rate at which product prices increase over time. Macroeconomists study this phenomenon through The Consumer Price Index...
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...Phillips Curve: looking at the economy by focusing on Inflation (a nominal variable) and the Unemployment Rate (a real variable). A Phillips Curve can represent a theory, stating what that theory sees as a connection between inflation and unemployment. Or, a Phillips Curve can represent actual data, reality. The Phillips Curve is usually representative graphically, with the vertical axis representing the rate of inflation and the horizontal axis representing the unemployment rate. Vertical Phillips Curve Under classical theory (pre-Keynes), there was a “dichotomy” between money and the real economy. So changes in the money supply should affect only inflation, not unemployment. Under this money neutrality, there should be no connection between the inflation rate and unemployment. This can be represented graphically with a vertical line: [pic] Keynesian Theory Keynes suggested that since prices don’t fully adjust in the short run, changes in demand can affect inflation and unemployment. For example, if Aggregate Demand increased from more C, or I, or G, or NX, or money supply, then prices would rise and unemployment would fall. Conversely, a decrease in Aggregate Demand would bring about a recession with higher unemployment but lower inflation (maybe even deflation). [pic] Evidence In the 1950’s and 1960’s, economists gathered evidence to see if Keynesian prediction about a trade-off between inflation and unemployment was correct. The simplest idea would be to plot...
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...the rate of inflation is too high to be lowered by interrupting the growth and impoverish the small people on low incomes and fixed. That is why after the 1965/1966 crisis and also after the 1997 crisis, lowering the inflation rate is a top priority in which the government and Bank Indonesia has succeeded admirably. In three years, inflation can be derived from 650 percent (1996) to 9 percent (1969), after 1997 inflation can also be reduced from 70 percent (1998) to only 5 percent (2003). But stability is not just for the sake of stability, but for something larger that is equitable and growth. After rising fuel prices, the prices become so high that people's purchasing power is still low. Economic growth indicate that the government has not been able to open employment opportunities to the people. Meanwhile, the business world also slows down. This is because the minimum wage increases the demand which must be fulfilled. Unemployed increased every year, in 2004 unemployment reached 10,854,254 people. Therefore, the purpose of making this paper are: 1. Knowing the concept and the relationship of inflation and unemployment. 2. determine the condition of inflation and unemployment in Indonesia 3. What the policy taken by the government to control inflation and reduce unemployment, increase employment. CHAPTER II Theory 2.1 Unemployment Unemployment is the inability of labor-force participants to find jobs. Unemployment can be caused...
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...formed expectations of inflation. C) Individuals assumed that expected inflation would be zero D) Individuals assumed the expected price level for the current year would be equal to the actual price level from the previous year. E) More labor contracts became indexed to changes in inflation. 2) Which of the following will tend to occur when a high proportion of a country's workers have indexed wages? 2) _______ A) The unemployment rate will be relatively high. B) A given change in the unemployment rate will cause a larger change in the inflation rate. C) The unemployment rate will be relatively low. D) The inflation rate will be relatively low. E) none of the above 3) The data suggest that in the European Union countries, the natural rate of unemployment: 3) _______ A) has become less "natural," since it is now almost entirely determined by the policies of a few large corporations. B) is now higher than in the U.S. C) is no longer a relevant concept. D) will soon exceed the percentage of the labor force that is working. E) has steadily declined over the past two decades. 4) Which of the following statements will likely be correct when inflation has not been very persistent? 4) _______ A) The current inflation rate will not depend heavily on past years' inflation rates. B) ...
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...Econ 141, topic 7 [ Inflation] 1. Inflation - Inflation is a continuing rise in the price level, which causes money to lose value. - Inflation is a rise in the price level, not in the price of a particular commodity. - It is ongoing, not a-onetime-only increase in the price level. - The inflation rate is the percentage change in the price level. It is calculated as the following: Current price level – Last year's price level x 100 Last year's price level 2. Demand-Pull inflation - Demand pull inflation is caused by an increase in aggregate demand. - An increase in consumption or investment or government expenditures or exports or the quantity of money → increases the aggregate demand. - A decrease in imports or taxes or interest rates → increases the aggregate demand Initial effect of an increase in aggregate demand: Price level LAS SAS The increase in demand raises the price level from 110 to 120 120 110 AD1 AD0 Real GDP Money wage rate response Price level LAS SAS1 130 ...
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...Abstract In the following report I will be explaining the relationship between Unemployment and Inflation and to see if the Phillips curve relationship is correct. In doing so I will study the causes and effects of inflation and unemployment along with inflation and unemployment figures from the last few years. Inflation is usually defined as a sustained increase in the general price level. We measure it as the annual percentage increase in prices. There are generally two types of inflation- Cost push and Demand pull. Demand pull Inflation occurs when there is to much spending in the economy. When consumers wish to spend money on goods and services increases faster than the supply of goods and services, or when demand exceeds supply, then prices are pulled upwards. The increase in demand causes it to shift outwards but because supply cannot keep up with demand prices go up as well. This is shown in the diagram below: For this type of inflation to occur people in general need to have a lot of money if there demand for general spending is high. Therefore this type of inflation generally occurs when there is a low unemployment rate for the majority of people must have some sort of income. Cost push inflation happens when firms costs go up. To maintain their profit margins, firms then need to put their prices up. In other words cost increases have pushed inflation up. Cost-push inflation may happen for various reasons. Wage increases - wages are a major proportion of costs...
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...“Must We Choose between Inflation and Unemployment?” by Milton Friedman Stanford Graduate School of Business Bulletin 35, Spring 1967, pp. 10-13, 40, 42 © The Board of Overseers of the Leland Stanford Junior University We have been told repeatedly that, if we are to have full employment, the price we must pay is some inflation. On the other hand, we are told that the goal of price stability should be put above the goal of full employment. In a way the view that we must choose between unemployment and inflation, or between price stability and full employment, is something of a modern version of Karl Marx’s view about the reserve army of the unemployed. In his development, Marx believed that capitalism would always need to keep a large reserve army of the unemployed to keep the proletarians in their places. The modern version of that doctrine says that only a reserve army of unemployed will prevent workers and laborers, whether organized in unions or not, from pushing for ever higher wages. The widely expressed argument insists that if you seek to expand aggregate demand through the kind of governmental measures envisaged in the Full Employment Act, if you seek to expand aggregate demand beyond that point at which enough unemployment will keep workers from trying to get ever higher wages, if you try to push it beyond that point, you can reduce unemployment. But, the argument goes, the reduction of unemployment is possible only by paying the price of inflation. What you must do, the...
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...popularity in 1960s. The inverse relationship between unemployment rate and inflation rate was first observed by William Phillips in 1958 in his study on British economy during the period 1861-1957. For many years this relationship has been used by policy makers to target unemployment and inflation levels. However, in recent times there are various doubts emerging to this concept as there are cases studied where the trade off between unemployment rate and inflation rate can be observed in the long run thus rendering this concept entirely short run in nature? (Phillips, A.W. cited in Ogbokor, 2005).It would be crucial yet interesting to test the validity of traditional long run Phillips curve as it used as a policy guideline and has had many controversies revolving around it for the same. Objective: Phillips Curve in the Long run: Examining the Long run relationship between unemployment rate and inflation rate in United States using univariate analysis (analysis based on descriptive statistics). Methodology: The data used for analysis has 58 observations collected over the period 1952-2008 consisting unemployment rate and inflation rate of US. It has been collected from Bureau of Labour Statistics and Measuringworth.com. We will make use of statistical tools to test the existence of relationship, if any, between the two variables using the t-statistic and descriptive statistics. Analysis: Unemployment rate and Inflation rate of the US Economy over period 1952-2009: ...
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...The United States economy has experienced many ups and downs for the past 42 years. There are many changing factors that influence the economy which includes the Gross Domestic Product, the government deficit, inflation, unemployment, and employment. Each of these factors give an indication to some degree of the current state of the United States economy. However, the strength of the economy has done anything but stay constant since 1970. Since 1970, each of the previous stated factors have changed year to year. By looking at each of the factors individually, one can get a general sense of the current state of the economy and possibly make future predictions as to where the economy is headed. Since 1970, GDP has steadily grown linearly. There has only been a few years where the real GDP has dropped but only by an insginificant amount. However, there was one year where the GDP dropped by $126 billion in the year 1982. During this year, the United States experienced a recession. However, the following year, the GDP was able to grow more than the amount it decreased the previous year; it increased $300 billion, thus, offsetting the loss of the prior year. After this minor recession, there was little to no decrease in GDP in the subsequent years. From 1997-2000, GDP experienced a huge amount of growth each year for four consecuvtive years. This growth was during the internet stock bubble. There were many new internet startups during these years and many people investing into...
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