...Importance of Monetary Policy for Economic Stabilization! Monetary policy is another important instrument with which objectives of macroeconomic policy can be achieved. It is worth noting that it is the Central Bank of a country which formulates and implements the monetary policy in a country. Like the fiscal policy the broad objectives of monetary policy are to establish equilibrium at full-employment level of output, to ensure price stability and to promote economic growth of the economy. Monetary policy is concerned with changing the supply of money stock and rate of interest for the purpose of stabilizing the economy at full-employment or potential output level by influencing the level of aggregate demand. More specifically, at times of recession monetary policy involves the adoption of some monetary tools which tend the increase the money supply and lower interest rates so as to stimulate aggregate demand in the economy, on the other hand, at times of inflation, monetary policy seeks to contract the aggregate spending by tightening the money supply or raising the rate of interest. It may however be noted that in a developing country such as Kenya, in addition to achieving equilibrium at full employment or potential output level, monetary policy has also to promote and encourage economic growth both in the industrial and agricultural sectors of the economy. Thus, in the context of developing countries the following three are the important goals or objectives of monetary...
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...Economic Problem in Indonesia Introduction and Overview Indonesia as the development country has to facing so many challenges and obstacles in order to achieve the goals of the country. From the very beginning the economic system in Indonesia is followed the Pancasila economic system. But, at the time before the new order, the economic system in Indonesia are liberal and statism that is not suitable for the citizen in the early of 50’s to 60’s. Before that time there are many program that already made by the government about the development of Indonesian economic, but that plan is not work as they are because the government not apply ‘the right man in the right place’. The economic activity that has to be handled by economist, at that time is handled by the politicians. So the fund is used in the sector of politics instead of economic activities. The problem that surfaced at that time is the abused of the foreign debt, the high inflation, and the population growth that are higher that the economic growth. After the new order, there are rehabilitations in the many aspects of life, and also decrease the rate of inflation at that time. All of that is included in the problem of economic in Indonesia such as; inflation, unemployment, poverty, income, and so on. Indonesian economy already experience the hyperinflation in the 1996, the inflation rate at that time is reached 650%. But, because of the development of economic growth, the hyperinflation now can be controlled According...
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...| Inflation and Government Economic Policies | M3:A2 | 5/1/2013 | | ECO 201 M3:A2 5/1/13 1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?). What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian and monetarist theories, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. With demand-pull, inflation is caused by aggregate demand being more than supply. With cost-push, inflation is caused when manufacturers and businesses raise prices due to shortages in order to balance increases in production costs. With built-in inflation, inflation occurs due to prior increases in prices caused by demand-push or cost-pull. And with quantity, inflation is caused by having too much money in the economy (What Causes Inflation?). Is inflation desirable and what can be done to control inflation in a market economy? Inflation is desirable when it is low, because low inflation represents price stability which is perfect for productive planning and investment. There are many ways to control inflation in a market economy which varies between a Keynesian and monetarist approach. Using a Keynesian approach, the government would get involved by breaking up monopolies, regulating commodity prices, and controlling wage levels, while using a monetarist approach, the government would make changes in policy in order to control the amount of money...
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... 14,117.2 a) What is the difference between GDP and GNP? GDP is the total market value of goods and services produced by labor and owned by a country regardless of where production took place. b) How did GNP change from 2008? GNP increased in 2008, but started decreasing in 2009. Domestic business, households, and the general government increased. c) What caused the changes? Income receipts for the rest of the world decreased, and income payments to the rest of the world decreased. Exports and imports of good and services increased. 3. What was national income (NI) for 2008? 12,609.1 a) What does National Income tell us? The national income tells us the rate of economic growth, living standards, and any changes of income between groups or the population. It is the sum of wages, profits and pension payments to people of the nation. b) What is the difference between GNP and NI? National income is calculated from factor cost of earnings that arise from the production of the nation’s goods, and...
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...mic on.Moreov ver,inflatio is used for to on d see how much countries developed. w d .But in my case i us inflatio for how much y sed on w it effec cted econo omic grow wth.And a also i follo up oth variabl with in ow her les nflation to show how the effect economic g w ey growth. T mode include a poten The el es ntial impa of inf act flation on growth ,current , GDP, inflation effect on consume prices via anuua % valu and in er al ues nflation on deflator(an nnual %). effect o GDP d T mode highlig The el ghts if inf flation inc creses dir rectly ther is a negative re n impact on grow t wth.When inflation above th percent he tage of … …then gro owth is affect in a nega ative way.Below tha rate inf at flation does not hav any ef ve ffect on h y ve tly e growth or it may even hav a slight positive effect. S So,in this paper inc clude both negative and posi h e itive affec of inflation on ct econom grow but mostly neg mic wth m gative aff fect, and also incl lude time series e eviden about how muc inflatio and def nce ch on flator have an impa on eco act onomic growth in Turke between 1979-20 h ey n 008. Introducti ion; T pape examine the effe of inf This er es ects flation on economic growth of longc o term.T inflation may effect econ The e nomic gro owth both positivel or nega h ly atively. Paper s shows tha the infla at ation has d direct effec on econ cts nomic gro owth. I...
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... PROPERTY BUBBLES IN HONG KONG ………………………………….…………….. 5 INFLATION AND INFLATION RATE IN HONG KONG ……………………………….. 10 3. CONCLUSION…………………………………………………………………………18 4. REFERENCES ……………………………………………………………………………..19 5. APPENDICIES …………………………………………………………………………..... 20 Appendix 1 ………………………………………………………………………………… 20 Appendix 2 ………………………………………………………………………………… 21 Appendix 3 ………………………………………………………………………………… 22 Appendix 4 …………………………………………………………………………………23 Appendix 5 ………………………………………………………………………………… 24 Appendix 6 ………………………………………………………………………………… 25 INTRODUCTION Resources and scarcity are the basic elements and tenet of economics, so resources and scarcity are related to human wants and desires. Money and time are the most constantly for the resources and scarcity which are the allocation from the resources and impacting the economically efficiency. Hong Kong has been enjoyed as one of the four dragons in Asia for 30 years with the rapid growth of economy worldwide and globalization, but she also suffers from the worldwide downside of economy due to the poor fundamental and lack of long–run strategies that trigger the existing difficult situation. There have many issues and challenges threatening Hong Kong economy recently, we analysis and evaluate two important problems, (1) Property bubbles in Hong Kong (2) Inflation that impacting Hong Kong economy in the short and middle-term...
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...Assignment 2: LASA 1: Inflation and Government Economic Policies Inflation is a measure of how prices have changed over time. If prices are changing due to inflation, each dollar spent will buy less. In order to answer the questions below, go to the following website: http://www.bls.gov/cpi/ Questions: What is inflation? What are the causes of inflation? Is inflation desirable and what can be done to control inflation in a market economy? What is the Consumer Price Index (CPI)? How has the CPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CPI for this period and cite your source. What is the Producer Price Index (PPI)? How has the PPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the PPI for this period and cite your source. What is the Consumer Expenditure Survey (CE)? How has the Survey behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CE for this period and cite your source. What do the measures above tell us about consumer behavior? Have incomes changed enough to offset the inflation since 2000? What can we predict about future inflation? What are the implications of these measures for government economic policies? By Wednesday, January 22, 2014, create a Microsoft Word file to collate your answers and submit it to the M3: Assignment 2 Dropbox. ...
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...between inflation and growth has remained a controversial one in both theory and empirical findings. Over the past couple of years, a lot of economists have claimed that an increase in economic growth leads to an increase in inflation and that decreased growth reduces inflation. There are several theories to explain the nature and existence of the inflation-economic growth with the theories suggesting that variety of possible conclusions. These include: Classical, Keynesian, Neo-Keynesian, Monetarist, Neo-classical and Endogenous growth theories. Studies have shown that inflation and its variability have significant real costs to the economy with several of the studies indicating that a 10% inflation rate can cause up to 3% loss in the GNP thus many governments have adopted inflation targeting as a dominant economic policy framework. While all the studies agree with Bruno and Easterly conclusion that inflation threshold will occur somewhere below 20% they differ significantly on the specific threshold rates. Most of the studies reviewed conclude that there is indeed a significant negative relationship between inflation and economic growth at high inflation rates in the long run. However, while many sophisticated techniques have been applied in an attempt to explain the relationship between inflation and economic growth; many key questions still remain unresolved. Introduction: The objective of this paper is to study the relationship between inflation and economic growth...
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...[Cover page] Policy Analysis Unit (PAU) Working Paper Series: WP 0604 Inflation and Economic Growth in Bangladesh: 1981-2005 Shamim Ahmed Md. Golam Mortaza December 2005 Policy Analysis Unit (PAU) Research Department, Bangladesh Bank Head Office, Dhaka, Bangladesh (www.bangladeshbank.org.bd) (www.bangladesh-bank.org) Policy Analysis Unit* (PAU) Working Paper Series: WP 0604 Inflation and Economic Growth in Bangladesh: 1981-2005 Shamim Ahmed Research Economist, Policy Analysis Unit Research Department Bangladesh Bank Md. Golam Mortaza Senior Research Associate Centre for Policy Dialogue December 2005 Copyright © 2005 by Bangladesh Bank * The Bangladesh Bank (BB), in cooperation with the World Bank Institute (WBI), has formed the Policy Analysis Unit (PAU) within its Research Department in July 2005. The aim behind this initiative is to upgrade the capacity for research and policy analysis at BB. As part of its mandate PAU will publish, among other, several Working Papers on macroeconomic research completed by its staff every quarter. The precise topics of these papers are chosen by the Resident Economic Adviser in consultation with the PAU members. These papers reflect research in progress, and as such comments are most welcome. It is anticipated that a majority of these papers will eventually be published in learned journals after the due review process. Neither the Board of Directors nor the management of Bangladesh Bank, nor WBI, nor any agency...
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...Topic: China’s five year inflation rate from 2007 to 2012 Content 1. Introduction ------------------------------------------------------------------------P5 2. Inflation rate of China over the last 5 years ----------------------------P5, 6, 7 -Definition of the concept -----------------------------------------------------P5, 6 -Performance over the last 5 years-----------------------------------------P6, 7 3. Impacts of the future economic performance ----------------------------P7, 8 4. Other relevant issues and discussion--------------------------------------P8, 9 5. Conclusion --------------------------------------------------------------------------P10 6. References--------------------------------------------------------------------P10, 11, 12 1. Introduction In today’s world, inflation this word keep appearing in our lives. From newspaper, television, internet etc. Now a day more and more people taking about the inflation. Not only because of the inflation keeping appear in our live, but also the people know more about the inflation than before. Few years ago, most of people do not know what inflation is and what it can do with our live. But today, this has been changed with the development of social and the growth of the economic. In the past people can only see inflation this word in some report. And most of the people do not understand about the inflation. Nowadays people already know what the inflation represents. By the news...
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...There are three major economic problems in our economy. They consist of economic growth, unemployment rates, and inflation. In the midst of this project, I will touch on all three of these major concepts. First let me start off with economic growth. The definition of economic growth is an increase in the amount of goods and services produced per head of the population over a period of time. So in reality this means “an increase in capital stocks, event is in technology, and improvement in the quality and level of literacy Are considered to be the principal cause of economic growth.” (1) Economic growth can be measured in two ways, by an increase in real GDP over appeared of time and an increase in real GDP per capita over sometime period. According to my macroeconomics book, the real GDP for the United States in 2011 was around $15,052.4 billion and $15,470.0 billion in 2012, which means economic growth rate for 2007, was 2.8%. Usually growth rates are positive, but they don’t always have to be, for example in 2009 the US growth rate was a -2.4%, which means a decrease in the country’s gross domestic product (GDP) during any given year. Let’s talk about modern economic growth, modern economic growth is defined as “sustaining an ongoing increases in living standards that can cause dramatic increases...
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...Topic name Impact of inflation on economic growth NAME: ZARGAM ABBAS Registration: MCM 143001 INTRODUCTION: The major purpose of this study is to examine the impect of inflation on economic on economy growth relationship in the economy of pakistan and to analyze the impact of inflation of gdp growth Pakistan; the unemployment was 3.14 percent in the year 1973; it increased to 3.7 percent in the year 1980, then it started declining and became 2.55 percent in the year 1989. After the year 1989; the unemployment started increasing and it reached to its highest level 8.64 percent in the year 2003he inflation rate changed each year and followed both upward and downward trend. It could be seen from the figure no. 2 for a case of Pakistan Objective: The major objective of the present study is to analyze the impact of inflation on gdp growth in pakistan. It is to evaluate the gdp growth performance and to assess the historical trends of the inflation in pakistan To determine and examine the feasible threshold level of inflation for gdp growth It is needed to exploir if the inflation in the time series caused to reduse the growth of the economy or not Literature Review Wajid and kalim (2007) the impact to test unit root problem and in order to find out the long run relationship among unemployment; inflation, economic growth, trade openness and urban population as share of total population the findings of the study sheds light on the impact of urban population as...
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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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...Chapter 1: Introduction Introduction Over a decade, the consensus of economics growth remains the key focus for every nation notably in least development countries (LDC). Poverty eradication, income distribution and welfare enhancement often discussed widely by these nations. Economic growth is often seen as the 'holy grail' of economic policy. This simplistic emphasis on economic growth is often criticized because of the limitations of economic growth in improving living standards. Another question arise is does economic growth promote sustainable improvement on country development? Malaysia economy has been transformed from a protected low income supplier of raw materials to a middle income emerging multi-sector market economy in the past 20 years. This is driven by the export of manufacturing goods, particularly electronics and semiconductors, which constitute about 90% of exports. In this paper, the primary objective is to investigate what is the relationship between openness, inflation and FDI with economic growth. Export and import often plays pivotal role in determine the gross domestic product (GDP) in a nation. In particular, the research question to be outlined is how does openness, inflation and FDI affect economic growth. Multinational corporations (MNCs) are those organizations that own or controls productions of goods or services in one or more countries other than its home country. MNC plays major role in foreign aids recipient countries, it contribution to...
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...Causes of Inflation: A Study in the Context of Bangladesh Mohammad Nayeem Abdullah1 Robaka Shamsher2 Newaz Ahmed Chowudhury3 Abstract In Asia, Bangladesh is one of the hardest hit by the current wave of inflation and oil price hike. The economy has been observing double digit inflation growth on point-to-point basis since July 2007. In Bangladesh, the correlation between per capita income and food weight in total Consumer Price Index (CPI) is one of the highest in the world and the economy is vulnerable to sharp hikes in fuel and non-fuel commodity prices. The BDTUS$ exchange rate has been depreciating steadily for some time, reaching a record high of BDT 72.70 per USD in January 2011, which has direct impact on food inflation that Bangladesh is currently experiencing. An International Monetary Fund (IMF) study shows food prices on headline inflation has been a staggering 55.9 percent in Asia in 2007, whereas the figure was 34.1 percent in the 2000-06 period. The researchers highlight that a further depreciation of the BDT could lead to additional cost push inflation for Bangladesh. This article attempts to investigate causes and consequences of inflation on the economy of Bangladesh. This paper also reviews the past record of the inflation and makes a forecast on the possible movement of inflation. At the end on the paper the researchers forward some strategic points that might be useful to reduce inflation. Keywords: Food inflation, oil price hike, general inflation, world food...
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