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

International Trade Economics Commentary. In hope of shifting the Eurozone economy closer to its full employment level, the European Central Bank currently is purchasing European government bonds

Extracts from this document...

Introduction

3rd Economics Commentry : International Trade ________________ ________________ The European Central Bank (ECB) is employing a new system of monetary policy which now it directly purchases government bonds from the Spanish and Italian governments. The objective is to lower interest rates on Spanish and Italian government bonds, which theoretically should show private investors that the two countries are financially able in returning their money thus decreasing the rising pressure on interest rates in the Eurozone, a dilemma threatening to counter the current torpid recovery from the 2008 and 2009 recessions. Monetary policy is a term for the manipulation of the interest rates and money supply by the Central Bank of a country, managed to either decrease interest rates (expansionary monetary policy) ...read more.

Middle

should decrease the real interest rate reassuring a greater number of firms to invest in capital goods and households to fund the consumption of a higher number of durable goods, pushing aggregate demand (AD) to the right (increase) returning the economy of the Eurozone to its full level of employment of output (represented as a shift from to in the right hand side graph). Though usually monetary easing like this should result in inflation, it is unlikely given the European?s large gap in output (illustrated as the distance between and the full employment level of output shown as a dotted line). An increase in AD should result in an increase in output however insignificant inflation as a result of the excess capacity of the factors of production within the European economy. ...read more.

Conclusion

The states of the Eurozone must become more competitive with those of Eastern Europe and Asia if they optimise to economically grow. In the medium-term, the Eurozone nations must exhibit a promise to fiscal limitation and more stable budgets. Eradicating loopholes that permit industries and prosperous consumers to evade paying taxes is imperative for example. In addition, rising the age of retirement, economizing on social welfare programs and raising marginal tax rates on the highest income earners should all visibly communicate the message to investors that these countries are indeed dedicated to fiscal restraint. As a result, their dependency on European Central Bank lending?s will deteriorate and private lenders will once more be keen on buying government bonds from the Eurozone at lower interest rates, permitting constant advancement in the private sector. ________________ [1] The name of the new monetary policy : refer to article ...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. World Economics assignment. The core economic issues that are focused on in this ...

    It's a practice of regulating imports and exports with the purpose of shielding domestic industries from foreign competition. Governments adopt protectionism in order to help the country become self-sufficient, to protect new industries, or as a bargaining tool. In terms of tariff which was applied in protectionism, there are two examples.

  2. Economics Higher Level Coursework

    The area of profit increases from P1ACE to P2BDO. Therefore the producer gains from increased profits and the consumers gain from increase in consumer surplus. However, there is no allocative efficiency or production efficiency, but the productive efficiency has improved as lower costs bring larger output now.

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

    C + I + G + (X-M) = GDP The income method adds up all income earned by the factors of production in the course of producing all goods and services within a country in a given time period: wages earned by labor, rent earned by land, interest earned by capital, and profits earned by entrepreneurship.

  2. Evaluating interest rates

    This combined to a decrease of the level of consumption therefore there will be an increase in the level of unemployment. Less consumption from the consumers means that there will be less demand for a product which will incite the producers to produce less to adjust the supply to the demand.

  1. Fair Trade

    In fact tourism has become Malaysia's second largest source of income from foreign exchange, despite being threatened by water and air pollution from the growing industrial economy. The majority of these tourists come from its bordering country, Singapore. In 1999, Malaysia launched a worldwide marketing campaign called "Malaysia, Truly Asia"

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

    have launched a number of initiatives towards harnessing IT for rural development and poverty alleviations. Even the private corporate sector is increasingly working towards the domestic market as a source of revenue generation. Online retailing, Cloud Computing and E-Commerce are the major growth drivers in the sector.

  1. What has happened to Canada's demographic over the past 50 years? What are ...

    Older people cannot regulate sleep as well as young employees, and thus can be impacted heavily by a drastic change in work hours. For young employees, it usually isn?t a problem to change hours. However, older employees might need a greater recovery time to adapt to the new change.

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

    Describe Mercantilism. What explains this? Mercantilism entails the theory that a country?s power depends mainly on its wealth to build strong navies and purchase vital trade goods. Vital trade goods that individual nations sought after were gold, ships, and trade routes. Ships were desirable because they were the primary means of international trade at the

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