...AS MACRO REVISION Indicators of Macroeconomic Performance: The performance of the UK economy is often compared to the performance of other countries' economies. There are four key indicators that are used when comparing economic performance: 1. Economic Growth 2. Unemployment 3. Balance of Payments 4. Inflation Economic Growth: Economic growth is defined as 'an increase in the productive capacity of an economy'. This is shown on The Production Possibility Frontier (PPF) below: There are a number of different causes of economic growth - Improving quantity and quality of labour will cause economic growth: * A decrease in income tax encourages the unemployed to find work and increases the quantity of the work force. * Inward migration results in more skilled workers within the country and with better labour available efficiency will increase. * Technological advancements will mean that the quality and efficiency of capital used by firms will increase and therefore productivity will rise. The Economic Cycle All countries at every stage of their economic development experience periodic business cycles where the rate of growth of production (real GDP), incomes and spending fluctuates. The length and volatility of each cycle varies over time. There are booms: * Higher consumption * More houses built * Imports rise and exceeds rise in exports (deterioration) * Lower unemployment * Rise in AD * Higher tax revenue for govt There...
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...an increased income because of his or her fear of being placed in a higher tax bracket and therefore paying higher tax payments is the wrong mindset for them and anyone else to have. Having that kind of mindset lets me know that they have been given misleading information on how our tax system works here in the United States, and as I stated earlier, it is essential that we first and foremost understand taxes in order to make important financial decisions. It would be understandable for...
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...proclamation and Inflation fighting credibility 9 Exchange rates, inflation and growth in small, open economies: A difference-in-differences approach 12 Monetary policy rules under a fixed exchange rate regime: Empirical Evidence from China 15 Fixed exchange rates and trade 17 Conclusion 19 Bibliography 22 Introduction This research paper looks to explore the relationship behind the infamous fixed exchange rate and the level of inflation. I also take a look at how there is a trade off between the exchange rate regime and trade activity shapes up. Fixed exchange rates are a monetary regime used by around 50% of the world’s economies. The advent of fixed exchange rates is not common in the developed world. One exception to this is the EU which maintains a very stringently monitored monetary policy. Fixed exchange rates are a popular policy tool in the emerging economies, where the governing elements are more interested and inclined towards keeping the rate of inflation low so that maximum public welfare can be provided...
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...The UK’s macroeconomic performance can be measured in terms of economic growth, inflation, unemployment and the balance of payments on the current account. One importance of higher labour productivity in the UK is that it means that each member of staff produces more output in the same given time period which will improve the economies position on the PPF by moving closer towards the curve. This is because the economy will be producing more output with the same amount of resources available which indicates a previous under-utilisation of labour in the economy. Furthermore, another importance of higher labour productivity is shown in Extract C, ‘any rise in aggregate demand (AD) will be non-inflationary when improvements in productivity are able to generate greater output,’ which empathises the importance of higher labour productivity in the long-run in terms of economic growth because the output of the economy is increasing without inflation. The benefits of low inflation rates are widespread, particularly to those who have savings. Another reason for why this could be considered is due to the fact that it increases the competiveness of the UK’s trade world-wide, for example because the average cost of producing one good has decreased the firms will have more freedom to lower prices, this has a positive effect on the balance of payment on the current account by bringing it into more surplus. On the other hand, an increase in the labour productivity could potentially result...
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...Aggregate Demand and Supply Models Team B ECO/372 March 26, 2015 Aggregate Demand and Supply Models Many factors within a nation’s economy have the ability to effect one-said nation’s aggregate supply and aggregate demand models. Of these factors, four will be explored through the course of this specific critique and it should be noted, that the specific nation to be observed is the United States of America. The specific factors to be observed in the United States’ economy are their unemployment, their expectations, consumer income, and interest rates. In addition to identifying these four factors and their economic effects, there will be identified what fiscal policies have been put in place by the United States government in order to aid the economy and finally, there will be an evaluation of these fiscal policies regarding their effectiveness from both a Keynesian economic perspective and that of a classical economist. Unemployment A nation’s unemployment rate, as can be expected, is calculated by dividing the total sum unemployed persons by the number of total persons available for within the nation. This formula yields the number that is considered the unemployment rate for whichever nation is in question, in this case though, the nation that is the focus of our investigation is the United States. According to the Bureau of Labor and Statistics website (2015), “the unemployment situation in the United States has been reduced to 5.5 percent. This decrease as reported...
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...Management Department Assignment Cyclical Effects of Inflation in the Economy of Bangladesh Course Name:- Micro Economics Course Number:- 1208 Submitted To Mr. Shah Redwan Chowdhury Assistant Professor Management Studies Jagannath University Submitted By Amity (Group-07) (114922-114940) 6th Batch, Sec:-B Management Studies Jagannath University Sl/No | Name | Roll | Status | 01 | Abul Hasan Emon | 114922 | Absent | 02 | Ashif Manowar Oli | 114924 | Present | 03 | Fatema Tuz Zohora | 114926 | Present | 04 | Tanvin Haque Mitara | 114928 | Present | 05 | Md. Rafiqul Islam | 114930 | Present | 06 | Khandaker Arif Hossain | 114932 | Absent | 07 | Touhidur Rahman Al-Baky | 114934 | Present | 08 | Rajib Sarker | 114936 | Absent | 09 | Bidyut Dey | 114938 | Present | 10 | Md. Farhad Hossain | 114940 | Present | Acknowledgement:- We have taken efforts in this assignment. However, it would not have been possible without the kind support and help of many individuals. We would like to extend our sincere thanks to all of them. We are highly indebted to Mr. Shah Redwan Chowdhury Sir for his guidance and constant supervision as well as for providing necessary information regarding the assignment & also for his support in completing the project. We would...
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...DOES MONETARY POLICY INFLUENCE ECONOMIC GROWTH IN PAKISTAN? Haji Saif Ullah (Author) Email: hajisaif@live.com Muhammad Ashraf (coordinator) Department of Management Sciences University Of Gujrat, Gujrat ABSTRACT This study examines the impact of monetary policy on economic growth in Pakistan. The study uses time-series data covering the range of 1991 to 2011.The effects of stochastic shocks of each of the endogenous variables are explored using Error Correction Model (ECM). The study shows that Long run relationship exists among the variables. Also, the core finding of this study shows that inflation rate, exchange rate and external reserve are significant monetary policy instruments that drive growth in Pakistan. It is therefore recommended that the establishment of primary and secondary government bond markets that can also increase the efficiency of monetary policy and reduce the government’s need to rely on the central bank for direct financing. Keywords: Policy instruments, Economic Growth, GDP, Money supply, monetary policy INTRODUCTION The aim of this study is to examine the impact of monetary policy on economic growth. Economic growth is an important macroeconomic objective for any country. Monetary policy has direct relation with economic growth. Folawewo and Osinubi (2006) stated monetary policy as the arrangements which are planned to control supply of money in a country. In many countries the basic aims of the monetary policy are to stabilize prices...
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...major restructuring towards establishing a market economy with emphasis on private sector-led economic growth. Bangladesh achieved good economic progress during the 1990s by adopting a series of structural and economic reform measures. The stabilization program reduced inflation as well as fiscal and current accounts deficit and established a healthy foreign exchange reserve position. Economic performance improved with gross domestic product (GDP) growth averaging 5 percent in the 1990s compared with 4 percent in the preceding decade. The acceleration in economic growth was accompanied by decreased incidence of poverty and a distinct improvement of some key social indicators. Rapid growth in food grain production has been a remarkable feature of the country’s economic performance in recent years. In FY2000, Bangladesh reached self-sufficiency in food grain production. A combination of factors accounts for the robust growth of the agriculture sector, and in particular of food grains. According to a World Bank estimate, Bangladesh has the 36th largest economy in the world in terms of GNP based on the purchasing power parity method of valuation, and the 55th largest in terms of nominal GNP in U.S. Dollars. This report analyses the trends in the major macro-economic indicators of Bangladesh, taking into account economic growth and standard of living, inflation, unemployment, balance of payment, Government Fiscal and Monetary policy and various aspects of the economy of...
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...Macro Economics Project Topic: Inflation Targeting and Interest Rules Section - D Group – 3 Members: Shankho Bag (PGP/19/225) Soham Dutta (PGP/19/230) Sohom Karmakar (PGP/19/231) Sumanraj E (PGP/19/232) Sumeet Mahapatra (PGP/19/233) Abstract:In the recent past India has been grappling with high inflation and inflation stands highest amongst all the G-20 nations. Faced with a twin effect of declining growth which created an environment of “stagflation”, India needed to re-work its entire monetary policy framework. The monetary policy of our country was focused on targeting Multiple Indices like GDP Growth Rate, IIP, WPI Inflation which resulted on low accountability, lack of proper direction and ultimately inflation spirally out of control. To give a new direction and change the discourse of monetary policy, it was obvious some serious reforms were needed. In this report, we take a look at the ground breaking shift in monetary policy when India officially adopted as “Inflation Targeting” as the primary role of its Central Bank (The RBI) and we take a holistic view of the situation. Introduction:The Indian economy during the period 2012, 2013 was at crossroads. With manifold problems surrounding it, the economy needed a major boost and course correction to go towards the path of sustainable growth. The Indian economy was faced with stagflation – the double edged sword of persistently high inflation combined with fall/stagnation of...
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...& Finance (2012), Vol.1 (2) Manni and Ibne Afzal, 2012 EFFECT OF TRADE LIBERALIZATION ON ECONOMIC GROWTH OF DEVELOPING COUNTRIES: A CASE OF BANGLADESH ECONOMY Umme Humayara Manni1, Munshi Naser Ibne Afzal1 1 Universiti Brunei Darussalam, Faculty of Business, Economics and Policy Studies, Brunei. ABSTRACT The objective of this paper is to assess the impact of trade liberalization on Bangladesh economy between the periods 1980 to 2010. This research analyzes the achievements of the economy in terms of important variables such as growth, inflation, export and import after trade liberalization. The paper uses simple Ordinary Least Square (OLS) technique as methodology for empirical findings. The analysis clearly indicates that GDP growth increased consequent to liberalization. Trade liberalization does not seem to have affected inflation in the economy. The quantitative analysis also suggests that greater openness has had a favourable effect on economic development. Both real export and imports have increased with greater openness. Liberalization policy certainly improves export of the country which eventually leads higher economic growth after 1990s. The findings of this study can be an interesting example for trade liberalization policy study in developing countries. KEYWORDS Trade liberalization, economic growth, developing countries, Bangladesh economy, OLS technique, openness, export, import, inflation 1. INTRODUCTION Like many developing countries, the primary...
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...Inflation – Impacts On The Economic Growth Of Nigeria By DoubleGist | Published: June 5, 2013 Inflation – Impacts On The Economic Growth Of Nigeria Inflation – Impacts On The Economic Growth Of Nigeria A macroeconomics problem facing Nigeria, and the most disturbing, is the problem of inflation. As a result of its growing rate, Nigerian government is concerned about its impacts on her economic growth. To place an order for the Complete Project Material, pay N5,000 to GTBank (Guaranty Trust Bank) Account Name – Chudi-Oji Chukwuka Account No – 0044157183 Then text the name of the Project topic, email address and your names to 08060565721. Many authors have written on Impacts of inflation on Nigerian economy, but the authors have different views because inflation analysis, nevertheless, one thing common is that all the authors agree that inflation has Impact on Nigerian economic growth. Samuelson (1973), defines inflation as “a general rising prices for breeds, cars, haircut, rising wages, rent etc. Onwukwe (2003), on his side defines inflation as “a significant and sustained rise in the general price level or a declining value of the monetary units. The problem created by the rising prices of goods and services has become two difficult for government to solve. During inflationary period, fixed amounts of money buy less quantity of goods and services. The real value of money is drastically reduced i.e the purchasing power of consumers are reduced. The Impact of rapid...
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...(Roll – 232) | GROUP ASSIGNMENT CORRELATION BETWEEN GROWTH AND INFLATION WITH SPECIAL REFERENCE TO INDIA & CHINA One of the most fundamental and central macroeconomic policy objectives of the governments, central bankers and economists has been to sustain high growth rate with low inflation. The influences of other macroeconomic variables like aggregate demand, unemployment and investment and that of factors like human and natural capital and technology on economic growth are well-established. But when it comes to the inter-relationship between inflation and economic growth, there are divergences in opinion, more so because of lack of any linearity in the two variables. Introduction Theoretically, it is argued that when growth is caused by rising aggregate demand at low level of unemployment, it would lead to inflationary tendencies. This is because when demand aggregate outstrips the available supply, the disequilibrium would push the prices up. Low and declining unemployment level means wages would also rise and thus price rise caused by demand pull will also bring in the cost push factors to sustain the inflationary conditions. Inflationary tendencies can be thwarted when the aggregate demand pulls are matched by increased productivity and investment. But in the times of inflationary expectations, the investment slackens as the future prospects of earnings deteriorate and thus the inflation continues to spiral. Short- run Philips Curve do give a fair explanation...
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...timber industry including how several economic factors affect it, including: price elasticity of supply and demand; positive and negative externalities; wage inequality; and monetary and fiscal policies. Price Elasticity Important to note is that the timber industry and the lumber industry are not one in the same and experience differences price elasticity. The price elasticity of demand for the timber industry is inelastic. Often landowners will hold inventory to sell at a later date if demand is low. The timber will not lose value in storage so price does not need to change. The price elasticity of supply for the timber industry is elastic, as prices typically increase in the spring due to low volume of timber as a result of winter weather. Possible Negative Externalities Recreational and Commercial Fishing: Corporations may elect not to harvest timber and lose earnings if timber harvesting damages the fish habitat. Water Pollution: If timber harvesting pollutes the public water system, costs may be incurred in the remunerations effort. Risk of Flooding: Increased runoff my decrease sewer capacity costing taxpayers additional money to repair the damage. Water-Quality Reduction: If timber harvesting decreases the quality of water, other companies that use the water to cool or clean their equipment or products may suffer damages. Possible Positive Externalities Recreational Opportunities: Forests provide many recreational opportunities such as hunting, fishing...
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...economics that concerns single factors and the effects of individual decisions. It is commonly known to be the study of individual decisions of a single business entity. It consists of analyzing the price of a particular product, the capacity production of a product, and how the price of each product in the market is affected by the forces of supply and demand. It considers regulations, taxes, and analyzes markets in order to effectively set a value for a specific good or service. The decisions made on a microeconomic level are very pinpointed and precise. The outcome directly affects the supply and demand chain as well as other 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...
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...Unit 3 Managing the economy Steve Margetts CONTENTS Aggregate Demand (AD) Aggregate Supply Equilibrium Between Aggregate Demand And Aggregate Supply Consumption And Savings Investment Government Spending Exports and Imports Objectives Of Government Macroeconomic Policy Inflation Unemployment Economic Growth Balance of Payments Conflicts Between Macro Economic Objectives Demand Management or Supply Side? 2 4 9 11 17 25 29 31 34 50 71 80 84 87 Page 1 Unit 3 Managing the economy Steve Margetts AGGREGATE DEMAND (AD) Aggregate demand (AD) is the total demand for goods and services produced in the economy over a period of time. DEFINING AGGREGATE DEMAND Aggregate planned expenditure for goods and services in the economy = C + I + G + (X-M) C Consumers' expenditure on goods and services: This includes demand for durables & non-durable goods. I Gross Domestic Fixed Capital Formation - i.e. investment spending by companies on capital goods. Investment also includes spending on working capital such as stocks of finished goods and work in progress. G General Government Final Consumption. i.e. Government spending on publicly provided goods and services including public and merit goods. Transfer payments in the form of social security benefits (pensions, jobseekers allowance etc.) are not included as they are not a payment to a factor of production for output produced. A substantial increase in government spending would be classified as an expansionary fiscal policy...
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