Part of The Student Room Group

  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Analyse and Evaluate the significance of Fiscal Policy rules and Fiscal Policy targets and constraints in promoting Economic Growth, Economic Stability and International Competitiveness

Extracts from this document...

Introduction

Analyse and Evaluate the significance of Monetary Policy rules and Monetary Policy targets and constraints in promoting Economic Growth, Economic Stability and International Competitiveness L1. Monetary policies are where the government use changes in the base rate of interest to influence the rate of growth of aggregate demand, the money supply and ultimately price inflation. In the short run economic growth is an increase in real GDP, In the long run economic growth is an increase in productive capacity (the maximum output an economy can produce) Economic Stability - the avoidance of volatility in economic growth rates, inflation, employment and unemployment and exchange rates. International Competitiveness - The ability of an economy's firms to compete in international markets and, thereby, sustain increases in national output and income. L2. Monetary policies can be used to promote economic growth, Economic (this stability reduces uncertainty, promotes business, consumer confidence and investment) and International Competitiveness. This causes an ? ...read more.

Middle

It is said that low and stable rates of inflation provide the framework for economic stability as inflation reduces the purchasing power of money. When the government uses monetary policy to reduce the rate of inflation inflation targeting) they can stop economic stability from becoming unstable as when inflation occurs, and usually wage growth ? there is a danger that inflation will become out of control so much so that producers and consumers are no longer able to use the signalling function so it can become clear what goods and services consumers most want. Inflation targeting makes the consumers and investors more clear about the future and so they know what to expect so they can plan ahead. This can cause an ? in C and I and therefore and ? in AD (shifting the AD curve to the right). The fact that inflation targeting is flexible means it meets the policy target. The government can use Monetary to policy to ? ...read more.

Conclusion

For example Inflation targeting has to be guided by forecasts of inflation and all macroeconomic variables that affect inflation. It also costs a great deal to employ people who have the ability to forecast inflation well which could cost a lot to employ someone capable of doing this, this means that it ? costs, which means the possibility of an opportunity cost involved as that money could have been spent on something else for example new hospitals. There can also always be unforeseen circumstances such as unexpected recessions and natural disasters such as the tsunami, this affects the Central Banks ability to deliver economic stability and economic growth as they do not know if they may need to be doing other policies to help these unexpected situations, as they may only be able to do so when the economies conditions are stable. To conclude Monetary rules and Fiscal Policy targets and constraints can promote Economic Growth, Economic Stability and International Competitiveness, however there are many factors to take into account when doing so. ?? ?? ?? ?? Katie Scott Homework Economics 8/10/2009 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

or


Here's what a teacher thought of this essay

4 star(s)

****
Mostly sound analysis with some errors. The use of arrows is annoying and saves very little time

Marked by teacher David Salter 02/04/2012

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. Marked by a teacher

    Assess the importance of international trade to the UK economy

    4 star(s)

    EU, then the EU could benefit economies even more, in terms of gaining the lowest market price for goods that can be purchased from other areas of the world. Today it is a very unrealistic view that a country can be self-sufficient and not take part in international trade.

  2. Marked by a teacher

    "Discuss the Effectiveness of Supply Side Policies in Improving UK Economic Performance"

    4 star(s)

    The idea is that privately run companies are more efficient and competitive and as a result they will increase. Advantages of privatisation are that the government can reduce its borrowing by selling these companies, and thus follow other policies which it believes increase efficiency, such as lowering income tax.

  1. How reliable are National income statistics as a means of comparing living standards between ...

    But exchange rates are largely dependant on the international trading and hence carry little relevance to the domestic currency's purchasing power within the country. Therefore an adjustment is made to the exchange rate in relation to the inflation rates

  2. The Impact of Globalisation upon the Japanese Economy

    It provides detailed surveys, services, and policies to help businesses trade and thereby promotes it. Trade liberalisation has not had as much impact on the Japanese economy as it has had on many other countries. There has only been one significant free trade agreement (FTA)

  1. The value of world trade has been growing at a faster rate than world ...

    deficit this can be devastating as not only will its debt repayments decrease but demand for its few exports are likely to fall, worsening the position of the current account. In 2010 the UK paid �30bn in debt interest. As a consequence countries such as the UK may be forced to implement harsh austerity plans or face soaring borrowing costs.

  2. How did medieval merchants solve the fundamental problem of exchange in long distance trade? ...

    If player I does decide to exchange, player II has the choice to either cooperate or to renege. Both sides gain if player II cooperates, but if we are assuming that player II wants to maximise their own self interest then player II will decide to renege, in which case player I will be worse off.

  1. Evaluate strategies which may be used by businesses and governments to improve the competitiveness ...

    In addition it would improve the non price competitiveness since a more educated workforce is likely to be able to be more creative and innovative.

  2. Assess the view that the main cause of globalization is the increased significance of ...

    The trade liberalisation and reduced transport costs which have contributed to globalisation have overall increased world output and therefore standards of living in many countries have improved. Globalisation has also allowed countries to benefit from comparative advantage, where one country can produce a good or service at a lower opportunity cost than another.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work