...The Economy, Monetary Policy, and Monopolies A Robinson Dr Ralph Cann-Tamakloe Principles of Economics 100 May 26, 2012 Analyze the current economic situation in the U.S. as compared to five (5) years ago. Include interest rates, inflation, and unemployment in your analysis. The United States is the most technologically advance country in the world, not to mention the largest. Everywhere you look or read the headlines are saying that the U.S. economy is in a great shape. Is that really the case? There has been a spike in the number of houses being sold; interest rates have hit rock bottom, and a record weakening in the federal budget balance. With all those things taking place within our economy, it is still not where it should be nor is it close to where it needs to be. The unemployment rate in April of 2007 was 4.5% compared to April of 2012 at an 8.1%. Unemployment rates are high compared to five years ago, but are low compared to 2 years ago. The country has been through a lot trying to build its economic status back to where it was years ago. The unemployment rate is the number of people actively looking for a job. Unemployment is an indicator of how other factors of the economy are doing. For instance, if it looks like the economy is attenuation, and the unemployment rate is increasing, then you know businesses aren’t confident enough to start hiring again, and vice versa. When setting...
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...MONETARY POLICY OF BANGLADESH AND ITS IMPACT ON ECONOMY Monetary policy is concerned with the measures taken to control the supply of money, the cost and availability of credit. Further, it also deals with the distribution of credit between the uses and the users, the lending and borrowing rates of the banks. In a developing country like ours the monetary policy has been effectively used as a tool for overcoming depression and inflation. As Prof R. Prebisch writes “The time has come to formulate a monetary policy which meets the requirement of economic developments which fit in to its framework perfectly.” Along with the economic growth the monetary policy has also to ensure price stability, as excessive inflation has an adverse distribution effect and hinders the economic development. To understand the monetary policy of Bangladesh it is important to understand the objectives or goals, targets and instruments of monetary policy. The goals refer to the objective which may be price stability or economic growth. Whereas the targets refer to the variables such as supply of money, bank credits and interest rates. The instrument ate the changes in supply of currency, bank rates and other interest rates, open market operation, changes in reserve requirement, selective credit contras. PRESENT MONETARY POLICY OF BANGLADESH: The central bank of Bangladesh has actually followed a policy of restring growth rate of the economy. It is almost two years mow, that the central bank of Bangladesh...
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...Monetary policy alone cannot save Indian economy Main Limitations of the Monetary Policy adopted by the Reserve Bank of India 1. Huge Budgetary Deficits : RBI makes every possible attempt to control inflation and to balance money supply in the market. However Central Government's huge budgetary deficits have made monetary policy ineffective. Huge budgetary deficits have resulted in excessive monetary growth. 2. Coverage Of Only Commercial Banks : Instruments of monetary policy cover only commercial banks so inflationary pressures caused by banking finance can be controlled by RBI, but in India, inflation also results from deficit financing and scarcity of goods on which RBI may not have any control. 3. Problem Of Management Of Banks And Financial Institutions : The monetary policy can succeed to control inflation and to bring overall development only when the management of banks and Financial institutions are efficient and dedicated. Many officials of banks and financial institutions are corrupt and inefficient which leads to financial scams in this way overall economy is affected. 4. Unorganised Money Market : Presence of unorganised sector of money market is one of the main obstacle in effective working of the monetary policy. As RBI has no power over the unorganised sector of money market, its monetary policy becomes less effective. 5. Less Accountability: At present time, the goals of monetary policy in India, are not set out in specific terms and...
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...decrease in expectations and investment, the resulting decrease in aggregate demand can be very large. This fall in aggregate demand can also fuel further declines in expectations, further multiplying the decline in demand. As aggregate demand falls, the price level also decreases which increases real wages because nominal wage sticks to the real one. Higher real wages force firms to fire workers, cut jobs and reduce production in the end. Aggregate output falls and the economy start to fall into recession. Three possible outcomes: 1. Rise of expectations; 2. Adjusting nominal wages to full employment level; 3. Government uses fiscal/monetary policy to affect aggregate demand. Question 3: Why is monetary policy guilty to cause business cycles according to the Monetarist Theory? a) The central bank cannot control output in the long run. Consider the consequences of a central bank attempting to target a level of aggregate output that is greater than the natural rate of output. If the economy begins at the natural rate of output, the central bank can achieve its target by increasing the money supply and aggregate demand. The problem with this policy is that it will not work forever. Eventually, the public will increase their...
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...fiscal and monetary policies can make in maintaining a stable economy. Both monetary and fiscal policies are aimed at keeping the economy in a stable condition by reducing inflation and aggregate demand respectively. A stable economy can be described as an economy experiences good levels of economic growth while maintaining low levels of inflation and unemployment. The low levels of unemployment can be achieved via fiscal policies such as subsidising certain industries to increase supply and therefore lower the price level,which would provide incentives for consumption, and therefore if consumption rises then AD should rise causing firms to need to increase supply, which can be achieved by increasing the labour force to achieve a higher output. An example would be the government subsidising the electric car industry to provide incentives to producers to increase supply by increasing the labour force and decreasing unemployment. Monetary policies can then be used by the bank of england in order to control inflation. For example the bank of england can set the interest rates in order to increase or decrease the cost of borrowing. If interest rates are increased then inflation should decrease as consumption and investment will fall. This will then help then help the bank of england hit the inflation targets set by the UK government, these currently stand at 2%. Monetary policies are extremely useful in prevent economic downturn as if inflation is controlled via monetary instruments...
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...As stable economy is one which has low rates on inflation and unemployment and a steady rate of economic growth along with a current account stability. Fiscal policy involves the use of government spending and tax receipts to influence the level and pattern of economic activity, whilst monetary policy uses interest rates to achieve the same. Fiscal and monetary policy can be used to influence short term Aggregate Demand with the aim of promoting a steady rate of economic growth, low unemployment and low inflation. In a recession there will be a loosening of monetary policy when interest rates are cut and a budget deficit run with the aim of boosting Aggregate Demand throughout the economy. This is what is happening at the moment in the UK as the economy slowly comes of out recession. Interest rates are down to 0.5% and income tax rates are slowly being cut to act as an incentive to workers to work harder and boost productivity. However, as we see in the UK economy these policies are having a very slow impact on growth. Consumer confidence and business confidence is very low and when this happens cuts in interest rates and taxes will not encourage household and consumers to spend more. They may be tempted to use the extra money to save more and pay off debt rather than spend and this could hinder economic recovery. Inflation in the UK economy was very low between 1992 and 2008 and this allowed interest rates to fall to a low level which helped boost economic growth...
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...current economic situation in the U.S. economy. Unemployment, inflation and interest rates are key elements of the current situation. Unemployment is classified as persons or individuals that are unemployed, actively looking for work and are currently available to work. The unemployment rate has decrease from 9.7 percent and is currently at 8 percent in the U.S. today, five years ago unemployment reached 4.3 percent in the U.S. Inflation is the sustained increase in price of all goods and services in the economy. In our current economy, inflation is at an average 2.1 percent and relative to jobs, when inflation is low, there tends to be a level of high unemployment. The inflation rate five years ago was at 3 percent. http://forecasts.org/inflation.htm Although the recent recession has formally ended, U.S. economic growth remains subpar, unemployment remains unacceptably high and the pace of job creation remains unacceptably slow. Real gross domestic product (GDP) growth has averaged just 2.5 percent in the 10 quarters since the economy hit bottom, about half the normal economic growth rate following a recession. The unemployment rate remains in the range of 8 percent, and less than half of the 8.7 million workers who lost their jobs during the recession are back at work. Simply put, America’s economy is underperforming. http://businessroundtable.org/studies-and-reports/permitting-jobs-and-business-investment Compared to the U.S. economy five (5) years ago, the unemployment...
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...the rise of China, following the enhanced economic and trade relationship between China and Asian economies, and China’s increasing importance in the world economy, China’s national currency, the renminbi (RMB) will be getting global from Asia. As regional internationalization of RMB is doubleedged, in order to eliminate the financial risks brought by this process, maximize the benefits, it is necessary for China to consider the trade off between costs and benefits of RMB internationalization. RMB internationalization is a dynamic process, in accordance with the different level of the process, the phased strategy should be implemented, and the corresponding policies should be pursued too. Key word: RMB internationalization Cost and benefit Roadmap Introduction If you travel in the Asian region, you will notice that the Chinese renminbi is appearing more often in shops and restaurants, driven by the rapid growth in mainland tourist volumes. Will Chinese Renminbi be the next world currency? Since 2000, RMB internationalization has attracted great attention from the policymakers and the academics both at home and abroad. There is sizable RMB circulation in China’s neighboring countries and economies, even RMB can be fully convertible in some developed countries, some of neighboring countries and economies treated RMB as a reserve currency. This is a new economic phenomenon for both China and the world. Because in economic development history...
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...IMPACT OF GLOBALISATION ON INDIAN ECONOMY POST 1991 Globalization (or globalization) depicts a process by which local economies, social orders, and societies have turned out to be incorporated through a worldwide system of correspondence, transportation, and exchange. Globalization for the most part implies coordinating economy of our country with the world economy. The monetary changes started have dramatically affected the general development of the economy. It likewise proclaimed the mix of the Indian economy into the worldwide economy. The Indian economy was in real emergency in 1991 when outside money saves went down to $1 billion. Globalization had its effect on different areas including Agricultural, Industrial, Financial, Health segment...
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...accommodated its nation over a money related centrality in Southeast Asia without recognizing its little measure. Singapore is a standout amongst the most open, and accordingly aggressive, showcases on the planet. Singapore's quick financial development from the 1960s set off its change into a present day city-state today. It has now a populace of more than four million individuals (counting outside labourers and perpetual occupants) living in a range of give or take 685 sq km. Exchange still constitutes the main part of the economy with fares adding up to more than US$120 billion and imports are assessed at about US$117 billion. In the decades after...
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...available today, a few stick out. That being supply side economics, demand side economics, and monetary policy. These Policies ensure the security and well being of the nations economy. First, there is supply side economics. Supply side economics say that economic growth is most easily made when barriers are lowered for people to invest in capital, to produce, and supply goods and services. Supply...
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...Case study – The U.S. Economy, 2009 Executive Summary In this paper, we will make research on the US economy development from 1990s till today. In the beginning, we will discuss the US economy historical path that shaped its structure and key forces defined the U.S. adaptability to changing economic environment. In the major part, we will evaluate the sources of the U.S. productivity and economic growth in terms of key economic indicators and success factors, including the government role. Finally, we will analyze the causes of the U.S. financial and economic crisis, commenting on the reforms undertaken and their impact to date. 1. Evaluate the forces underlying U.S. adaptability to changing economic forces. Key forces of the US adaptability to changing economic forces were low-wage competition from foreign countries, and the growth of new high-tech industries. Mexico and China’s low-wage competition forced to intensify changes and adjustments to compete effectively with, while many cities with skilled workforce and university research centers enabled technological capability for new high-tech businesses, small and medium (Cadieux, 2009). Differences in economic structure, forced by the differences in regional economic performance, were one of the key forces that created a unique system of US adaptability to changing economic forces. These forces shaped the US regions to adapt and “specialize” in the way that provided competitive advantage for each region. Northeast...
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...World Bank Report on Economic Growth In the last forty to fifty years Hong Kong and Singapore have gone from developing nations to industrialized nations with high standards of living. Hong Kong and Singapore have gone from an average gross domestic product per capita of $5,000 forty years ago to $50,000 per capita today. Several fiscal and monetary policies have contributed to the economic prosperity of these two countries. Strategies that have been used to encourage economic growth in Hong Kong and Singapore include economic policies that foster investment, entrepreneurship, risk taking, and innovation. These fiscal and monetary policies have allowed Singapore and Hong Kong to experience significant and rapid growth. Singapore and Hong Kong have implemented fiscal and monetary policies that encourage investment, entrepreneurship, risk taking, and innovation. Some of the policies implemented in the last forty years include open economic trade policies that favor exports and imports by limiting tariffs. Another economic strategy is that both Singapore and Hong Kong established themselves as trade hubs for their regions, as well as financial hubs for their regions. Because Hong Kong and Singapore are financial hubs they both have stock markets and strong banking sectors, which allows for capital investment to be readily available. Singapore and Hong Kong both have implemented very low tax rates for both personal tax rates and corporate tax rates. Low tax rates, combined with...
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...Essay on the Role of Banking in India's Developing Economy One of the major considerations that led to the nationalization of the fourteen major commercial banks of India in 1969 was the fact that banks, in general, had been negligent of the vital priority sectors of the economy, viz., agriculture and small-scale industries. The commercial banks had remained largely indifferent to the credit needs of the farmers for agricultural operations and land improve¬ment. A handful of people were able to exploit the bank finance to serve their own individual interests and convenience. Very often, they used bank funds for the hoarding of essential articles and for specialization, thus nurturing anti-social elements. Nationalization brought about a major policy shift in the working of these banks. The economic development of our country depends more on real factors like the industrial development, modernization of agri¬culture, organization of internal trade and expansion of foreign trade, especially exports, and less on the monetary factors contri¬buted by banking— Economic planning like laying down of specific targets and allocating particular sums of money that constitute the economic policy of the government also plays a significant role. Still we cannot under-estimate the importance of banking and the monetary mechanism. One of the most important problems of a developing economy is that of capital formation. There is a good deal of difference between hoarding and saving and the people...
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...introduction Hong Kong is one of the fastest growing economies in the world. It is also one the four Asian Tigers. Aim of this paper is to find out how Hong Kong’s “positive non-intervention” policy and rules-based approach applied in the practice and how it helps Hong Kong achieve enormously success. The factors account for the success of Hong Kong economy are that openness and freedom from foreign exchange rate and fiscal policy, reasonable economic policies, and non-interventional approaches to economic policymaking, and high trade volume. Even though government plays a minor role during the structural transformation and economic growth, it does not mean that government’s role is not important. In fact, government’s approaches help Hong Kong succeed in many ways. The first part of the essay will review brief background when Hong Kong was under British governance in 1950s and 1990s. Second part of this paper will investigate the rise of manufacturing in Hong Kong and during 1950s and 1960s. Third part of this paper will focus on the change in type of manufacturing during 1970s. Fourth part of this paper will examine the rise of financial sector in Hong Kong during 1980s to 1990s. In each of the periods, government’s impact on the economy will also be discussed. Hong Kong’s economy miracle between 1950s and 1990s is an excellent economic model to learn from for the rest of the world. Hong Kong government’s hands-off approach would also give guidance of economic development...
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