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Introductory Economics

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Introductory Economics Table of Contents Page Table of Contents 1 Section 1: Macroeconomics Essay 2 Section 2: International Economics Essay 3 Bibliography 5 Section 1: Macroeconomics Explain what is meant by the term 'inflation' and outline the policies used by the government to achieve its inflationary target. There are four macroeconomic policy objectives that a government pursues: high and stable economic growth, low unemployment, low inflation, the avoidance of balance of payments deficits and excessive exchange rate fluctuations. Some of these policy objectives may conflict with each other depending on the priorities of the government. A policy designed to accelerate the rate of economic growth may result in a higher rate of inflation and balance of payment deficit. Throughout the fifties and sixties, rates of inflation were generally low in the advanced industrialised economies. In the early seventies, inflation rose dramatically. By the end of the decade, many governments regarded inflation as the most pressing of their economic problems. Then with the world recession of the early eighties inflation began to fall, only to rise again with the boom of the late eighties, but fell back with the recession of the early nineties. ...read more.


It could lead to greater prosperity, lower inflation, more jobs and greater national influence. On the other hand, it could lead to higher unemployment, failing businesses and a loss of national sovereignty. Pro-euro and anti-euro arguments not only discuss the effects on business, the economy and our sovereignty, but on personal finances, mortgages, pensions and house prices. The single currency will directly affect our exchange rate and interest rates and, indirectly, jobs, trade, investment and economic growth. The main cause for concern is the standard interest rate that will be imposed across the continent by the European Central Bank in Frankfurt. If Britain's economy is ever out of step with the rest of Europe, interest rates will be wrong and put Britain back in to a boom and bust scenario. By joining the euro we will be entering the largest single market in the world outside the US. This will enable businesses to sell more widely, achieving greater economies of scale. It will also enable families and businesses to buy from a wider and cheaper range of suppliers. Both of these will boost trade and increase Britain's prosperity. ...read more.


Adopting the euro would mean an entirely new set of prices, new coins and notes. Although consumers would suffer confusion initially, this can be reduced by a period of dual pricing followed by a period of dual circulation. This will give customers sufficient time to get used to both the new prices and new currency. Cash points, tills and vending machines will all have to be changed or simply bought anew. Accounting systems will have to be switched, and staff retrained. The British Retail Consortium estimates that it would cost shops �3.5 billion. This is though a one-off cost that will not be repeated. It can be looked as just simply bringing forward an investment rather than a whole new cost. Some British businesses have already converted its operations to the euro, as many exporters now have to price their goods in euros rather than pounds to encourage sales from Europe. To conclude, there are many pro-euro and anti-euro arguments with clear benefits and costs to either course of action. The obvious benefit is that Britain is involved within the second largest single market in the world and not at risk of losing foreign investors. The biggest concern about joining the euro is undoubtedly the loss of sovereignty, reducing the governments' ability to run the economy and the set interest rate for the whole continent. ...read more.

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