• 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. Extended Essay Economics

    Demand in general in Venezuela is also very high; this in turn means that prices are generally high making business quite profitable if a firm has access to CADIVI. Venezuela was described as a "high risk, high returns" (Khandelwal) location.

  2. Economics HL - IA

    Commentary number #3 Title of extract "Euro zone interest rate up to 3.5%" Source of extract http://news.bbc.co.uk/2/hi/6217112.stm Date of extract February 5th, 2007 Word count 750 Date the commentary was written February 9th, 2007 Syllabus sections Section 3 Candidate name Peter Frederiksen Svane Candidate number 000134 - 031 The article,

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

    * While making economic growth, there should be the maintenance of high and stable levels of economic growth and employment so that everybody will have a high standard life and the future generations will live in prosperity, too. (Total 10 marks)

  2. Macro Economics Notes

    Circular flow of NY - page 208 Macroeconomic models - Components of AD AD = C+G+I+X-M Consumption + government spending + investment + exports - imports AS v AD Equilibrium level of NY Where AS = AD Inflationary Gap The gap between the rate of inflation when the economy is

  1. IB Economics H.L. Coursework

    and the price that consumers are willing to pay for that quantity is represented by ps -p1. Thus, the government pays the equivalent to the dashed triangle in the diagram. The Figures 3, 4 and 5, represent the three possible scenarios in the Peruvian housing market for the year 2010.

  2. Economics Commentary - Tax cuts make a cross-party comeback, thanks to economic woe

    Bank of England slashed the base rate of interest by one and a half percentage points on November 6th and will probably cut more) but banks' unwillingness to lend has gummed up the transmission of lower rates to borrowers. Experts have given fiscal stimulus the nod, including Mervyn King, the bank's governor, who offered qualified support this week.

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

    Some of the Key drivers in the Indian E-Commerce markets is to increase broadband Internet and 3G and to improve the standards of living. Small Entrepreneurs contribute 20% of total sales for online companies. Going with Modi government?s initiative ?Make in India?, Many Online companies has come forward to provide platforms to support small scale manufacturers and craftsman.

  2. 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.

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