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

Economics Internal Assesment

Extracts from this document...


COMMENTARY COVERSHEET Economics Commentary Number: HL Number 2 Title of Extract: India central bank cuts key interest rates Source of Extract: The International Herald Tribune Date of Extract: 07/12/2008 Word Count : Date the Commentary was written: 19/05/2009 Section of the Syllabus to which this commentary relates: Sections 3.3 Candidate Name: Abhishek Puri The impact of the global financial crisis on India has been export centric. As a consequence of the crisis, steeply diminishing export growth has resulted in low business confidence and a decrease in industrial production naturally, has been observed. As a result, India's economic growth decreased from roughly 9.0% to 5.3%. One must establish that Fiscal Policy is the set of a government's policies relating to its spending and taxation rates. ...read more.


Changes in the central bank's interest rate can affect the level of Aggregate Demand in the economy. To increase aggregate demand, the central bank may lower the interest rate. This ultimately reduces the cost of borrowing and can lead to increases in both consumption and investment. This is known as expansionary or "loose" monetary policy. As a part of monetary policy, the Indian central bank cut the "benchmark repurchase rate" (the rate at which it makes short term loans to commercial banks) from 5.5% to 5%. The cut in interest rates for commercial banks will allow these banks increase their capital flow through loans or deposit this capital to meet reserve requirements while loaning out the capital which could not be loaned out earlier thus increasing the money supply in the market. ...read more.


Tax cuts have lead to an increase in consumption due to higher savings, thus contributing to the notion to shift AD to the right along with monetary policy. The increase in the injection of capital into the money supply by $ 4 billion might not be a grand amount for a large economy, but it nevertheless, adds to the Government Spending component [G] of the determinants of shifting Aggregate Demand, in this case, to the right. Therefore, the combination of the application of fiscal policy through tax cuts and government spending along with that of monetary policy on a larger magnitude should lead to Aggregate Demand shifting to the right while increasing price levels and revitalizing the Real Gross Domestic Product of India while also reducing the unemployment rate. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

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

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 International Baccalaureate Economics essays

  1. Growth and Development Problem Set - IB Economics exam questions and answers.

    (ii) Gross Domestic Product or GDP is defined as the market value of all final goods and services produced within a country during a given time period (usually a year). It includes spending by the four components, Consumption spending + Investment spending + Government purchases + (Exports-Imports).

  2. Economics HL Commentary

    Now, the Cartel will allocate the output quota to be produced by Countries A and B in such a way that the marginal cost of producing the allocated output of each country is the same. Thus, if a line is drawn from G, parallel to the X axis, it will intersect MCb and MCa at H and J respectively.

  1. Macro Economics Notes

    Macro -economics measuring national income Cyclical unemployment - this can be overcome by fiscal policy (Keynesianism), monetary policy (monetarism) or by doing nothing and waiting for the economy to correct itself (laissez faire economists). Removing minimum wage. Increase government spending. Investment projects to stimulate the circular flow of national income.

  2. What is the impact of the Notional Interest Tax Deduction system on investments in ...

    This tax system seems to have prospective benefits and can be linked closely to the competition and monetary policy of the European Union. This is due to new companies investing in Belgium; a rise in competition for local companies is noticed.

  1. Economics HL - IA

    The equilibrium will be at Em, thus the price is at Pm and the quantity at Qm. If the extra cost is included, which it in fact is, the supply will be represented by SSocial Cost. This will result in a new price at POptimum and quantity at QOptimum.

  2. Role of ICT for "Make in India" government initiative.

    Indian government?s initiative to ?Make in India? has boosted the Indian economy by attracting many foreign investors to invest in India. This event is considered to be very constructive and fruitful. Indian Government has also launched ?Digital India? campaign as a complementary for ?Make in India? initiative.

  1. Defining Fiscal Policy and its application in India.

    Public Savings : The resources can be mobilised through public savings by reducing government expenditure and increasing surpluses of public sector enterprises. Private Savings : Through effective fiscal measures such as tax benefits, the government can raise resources from private sector and households.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    In Marx?s theory, the idea that a proletariat's wage is unaffected by the price of the good which he produces is a perfect example of exploitation. The exploitation of the working class is the foundation of capitalism. The wealth disparity that is seen in modern day society is a perfect example of the bourgeoisie class and the proletariat class.

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