Define, Describe and Determine the UK's Monetary Policy
Define, Describe and Determine the UK's Monetary Policy Monetary policy involves the manipulation of interest rates and the money supply to influence the rate of growth of aggregate demand and inflation. Changes in the interest rates can also affect the exchange rate. The Measurement on Money There is not one way of measuring money because it is used in a number of different ways. The two main measures of money are M0 and M4, and these are recorded by the Bank of England. M0 (Narrow Money) - This consists of all notes and coins in circulation outside the Bank of England, plus the operational balances of commercial banks at the Bank of England. It is thought that each adult has around £100 per week for traction purposes. It is a measure of the cash base in the economy. Most economists think that changes in the level of M0 have little effect on total output and inflation. Although it can be thought to be a coincident indicator of consumer spending and retail sales. Thusly, M0 reflects changes in the economic cycle, but does not cause them. M4 (Broad Money) - This consists of all notes and coins and deposits held at UK financial institutions by the private sector. It includes deposits held by the private sector (households and firms) for transactions and savings at banks and building societies. It also includes new money created by lending in the form of loans and
Examine the arguments for a freely floating exchange rate
"Floating Exchange Rates bring about equilibrium in the global economy." a) Examine the arguments for a freely floating exchange rate (50 marks) An exchange rate system is a system, which determines the conditions under which one currency can be exchanged for another. A freely floating exchange rate system is where free market forces determine the value of a currency. In theory, governments through their central banks, are assumed not to intervene in the foreign exchange markets, however, governments in practice find it impossible not to intervene as exchange rates can lead to significant changes in domestic output, unemployment and inflation. In theory, governments need not to intervene, as it is argued that freely floating exchange rates will automatically move to restore equilibrium on the current balance of the balance of payments. For example, if the current balance of the balance of payments in the UK was in a deficit, meaning that the value of imports exceeds the value of exports in that particular period, the demand for sterling pound will fall and the value of sterling demand for foreign currencies will rise. The external value of the pound would fall, making UK exports more price competitive and UK imports less competitive in the international market. Export sales therefore rise and import purchases fall, correcting the current balance deficit. The opposite
Identify the causes of unemployment and suggest suitable remedies
Unemployment . There are two main methods of measuring unemployment in the UK: a) the claimant count b) the labour force survey a) This method was used for the whole of the 1980s and most of the 1990s. It simply involves taking a count of the number of people unemployed and claiming benefit. These are: the Jobseeker's Allowance (JSA) and National Insurance credits, claimed at Employment Service local offices. People claiming JSA (formerly Unemployment Benefit) must declare that they are out of work, capable of, available for and actively seeking work during the week in which the claim is made. They enter into a Jobseeker's agreement agreeing to take action to find work and to improve their prospects of finding employment. However, this method has many imperfections and so the incoming Labour government in 1997 changed to the second method of calculating unemployment. This measure has been seen as inaccurate because it omits many people who are unemployed but are not actually claiming benefit. There have been thirty changes to the way in which this measure is counted over the last twenty years. For example: in the late 80s, it was decided that those aged between 16-17years old should not count, because they could either stay in education or engage in government training. Also, more recently, it was decided that one could only claim Jobseekers Allowance for six months,
In this piece of coursework, I aim to investigate the changes the IT industry has caused in the labor market in Hong Kong and what effects it will cause in the future as well.
INTRODUCTION AIM: In this piece of coursework, I aim to investigate the changes the IT industry has caused in the labor market in Hong Kong and what effects it will cause in the future as well. METHODOLOGY I will use primary data such as a questionnaire to give me an idea what people think about introducing the IT industry and also secondary data such as government's statistics and newspaper articles to provide me with background knowledge. ANALYSIS DEMAND The Past Trends From being a small fishery village in the 1950's to the blue-collar based workers in the 1970's to the present well-known trading metropolis in Asia, Hong Kong has experienced two industrial revolutions. In both changes, there is an obvious drop in employment rate in one industry while a rise in the other. For example, from the government's statistics (ref. Appendix 1 and Figure 1) we can see that in the 90's, the industries with the largest decrease and increase in employment are manufacturing and wholesale/retail respectively. Hence, it illustrates the diminishing of the secondary sector and emergence of the tertiary. Hence we can see that at present, the secondary sector is disappearing and part of the reason is because since technology is capable of replacing workers, the demand for manual labor has decreased. Since they are not needed anymore, the people who originally own manufacturing
I will be evaluating on the article "UK inflation drops to Bank target" by the BBC which only focuses on this problem. Brief summary: The main issue in the article
Recently in United Kingdom- a powerful and wealthy economy, there has been an issue being discussed with growing worry. The problem, not so strange to most countries in the world, is inflation, more specifically "the surge in UK inflation rate" in 2005. I will be evaluating on the article "UK inflation drops to Bank target" by the BBC which only focuses on this problem. Brief summary: The main issue in the article is the drop in the inflation rate in 2005 in three successive months, what causes have led to such a decrease after months of increasing inflation, what actions have been taken to bring down the rate of inflation and the effects that such a drop created. The major concepts involved in the article are inflation itself, CPI, RPI, inflation rate, cost push inflation, interest rate. The first concept, inflation itself is actually a sustained increase over a period of time in the general price level, in other words a fall in the real purchasing power of money. To understand about inflation, another concept is involved which is CPI: The consumer price index (CPI)-the measure of the consumer price level. What is CPI? CPI reports the cost of a fixed "market basket" of consumer goods and services over time. The formula of calculating CPI for a particular year is found as follows: Price of the most recent market basket in the particular year CPI =
Economics - House Prices.
BY SHERYAR MAJID Contents Item Name Page Introduction What Affects House Prices (Unemployment) 2 What Affects House Prices (Location, Income, Interest Rates) 3 What Affects House Prices (Interest Rates) 4 What Affects House Prices (Supply Factors, Crime Rate) 5 Major Factor Affecting House Prices, Unemployment 6, 7, 8 Statistics And Graphs About The Major Factor Affecting House Prices, Unemployment 9, 10, 11,12, 13, 14, 15, 16 Comparing Two Houses In Two Areas, And Looking At What Affects The Houses Price 7, 18, 19, 20, 21, 22 Conclusion 23 Bibliography 24 Appendix 25 onwards Introduction There are many things that affect house prices. Some things have a short-term affect such as interest rates and unemployment rate, but others have long term affects such as Location of the house and access to basic amenities. I will be exploring all the things that affect house prices as well as comparing two areas in Redbridge and comparing the price of houses in these areas along with the cost of living in these areas. I will also look and compare all the following things which I think affect house prices, these things can affect house prices in may ways and sometimes have knock on effects, for example interest rates go both ways, they can increase and decrease the price of houses as I will explain. Then I am going to concentrate on what affect unemployment
Discuss whether inflation is necessarily harmful [12 marks] (27 minutes)
Transfer-Encoding: chunked Discuss whether inflation is necessarily harmful.  While inflation is not always harmful to the economy, it can, in certain circumstances cause several issues depending on the degree of inflation occurring. One such issue can be the subsequent fall in availability of credit to the population. As, during inflation, prices rise, the purchasing power of any unit of currency falls accordingly. This then affects the availability of credit in two ways, on the one hand, it incentivizes purchases in the present, thus lowering the amount of money people save because more of the disposable income is spend now, hence, if there if less money being saved, there is less money to be loaned out. On the other hand, it directly disincentivises lending money, as, when the money will be repaid in the future, it will have a lower purchasing power than it did initially, essentially causing a negative interest rate to exist unless the nominal interest rate is adjusted according to the inflation rate, however, in the case where the inflation rate is both high and oscillating, this may be very difficult to implement. This decrease in the availability of credit resulting from inflation will then go on to lead to a fall in investments and spending as people are no longer able to finance startups, investments and expenditure through credit. This is then likely to cause
Structured Response a) + b) on Absolute Advantage, Comparative Advantage and Trade (  +  marks, 45 minutes)
Transfer-Encoding: chunked 1. In a two country world, one country is more efficient at producing one product and the other country is more efficient at producing another product, explain why specialisation and trade usually benefit both countries.  In the case where a country can produce a given product more efficiently than another, it means that the country happens to have an absolute advantage in the production of said good, hence, if both countries allocate equal amounts of resources to the production of said good, the country with the absolute advantage will be able to produce more of it. This absolute advantage can be due to a number of reasons ranging from factor endowment, making it easier for a country to harvest the raw materials required for the production of a good, pre-existing infrastructure providing the framework for more efficient production or higher levels of education leading to greater worker productivity. In turn, given that one country has an absolute advantage in the production of one good while the other has an absolute advantage in the production of the other, a comparative advantage for both countries arises in the production of the good that they are more efficient at producing, meaning that they can produce the good at a lower opportunity cost than the other country, thus creating a basis for trade. Take the example given in the table
Assess the view that falling unemployment will inevitably lead to an improvement in the standard of living for people in the UK. (25)
Assess the view that falling unemployment will inevitably lead to an improvement in the standard of living for people in the UK. (25) Unemployment is a situation where people who are able, available and willing to work are unable to find employment. The standard of living of the general population in the UK relates to the quality of the life they are able to lead. Falling unemployment has consequences on inflation, wages, government finances and the social fabric of society. Falling unemployment generally leads to higher wages, which results in a greater standard of living for economic agents as they have greater income. The derived demand for labour increases as firms must hire more workers to meet greater demand. This results in firms having to offer higher wages to workers as there is a smaller pool of workers to choose from, and so the firm must be attractive to workers by offering higher wages. These higher wages can translate into an improvement in the standard of living for people in the United Kingdom as they can now spend more money, to improve their quality of life. This positive impact is exacerbated through the positive multiplier effect. The initial increase in aggregate demand will lead to a proportionately greater increase in national income, which will help other firms as they can benefit from other firms hiring, as they now have more consumers. However, such
Public sector and economic efficiency in providing public and demerit goods.
Points of development: * Definitions of economic efficiency (2) * Analysis of how the public sector may improve allocative efficiency for public goods (3) * Analysis of how the public sector may improve allocative efficiency for demerit goods (4) * Evaluation of which factors may contribute to the success or failure of each policy (2+2) Note: the mark scheme suggests other ideas for the development but we haven’t discussed them yet. Later on in the year you will be able to provide a more detailed answer drawing from different units. Economic efficiency refers to the use of resources that create no waste. It include to production [a]efficiency (producing one extra units of one goods without decreasing the quantity for another [b]good) and allocative efficiency (produce appropriate output base on consumer preferenc[c]e) Public goods are non-excludable and non-rival. Because of that, there is no incentive for provision from profit-maximizing private firms due to the free-rider problem (ra[d]tional decision from individuals by not paying for public goods). As a result, these goods might be under-provided, [e]so there should be more resources used to be able to achieve allocative efficiency. Public sector might directly provide these kinds of goods, so the situation of under-provision [f]might be resolved, as they often don’t aim for maximizing profit.[g] Demerit goods