What are the government objectives? Explain why each is important and how the government can achieve each objective.
Matthew Halpin 3 May, 2007 What are the government objectives? Explain why each is important and how the government can achieve each objective. The Government primary economic objective is to achieve economic stability. In order to achieve this economic stability the government focus on achieving four principle objectives. These objectives are; to achieve equilibrium in the balance of payments, to keep unemployment levels low, to keep inflation levels low and for overall growth of the economy to be achieved. The various tools that the government has to 'manipulate' the economy to achieve these objectives include; interest rates, the tax system, exchange rates and their own spending. I will begin by looking at the objective of keeping unemployment levels low. Firstly, what is unemployment? This is the problem encountered when there are people able and willing to work but are unable to find jobs. Any economy facing mass unemployment has a major economic and social problem on its hands; therefore making it one of a government's primary objectives to keep levels as low as possible. The economic problem lies in the fact that scarce factors of production are lying under-utilised and wasted. Consumers want goods and services; workers want to provide them; factories and workplaces are probably lying idle. Yet the economic system is unable to fully match up this desire
Examine the difficulties which confront policy makers when they attempt to formulate macroeconomic policy.
Macroeconomic Policy 4ECQ 503 Mamun Miah 03148844 Business Management (a) Examine the difficulties which confront policy makers when they attempt to formulate macroeconomic policy. Macroeconomic policy is mainly concerned with attempting to intervene and change the functioning of the economy in order to improve its performance1. It is used by the government and Central Banks (Bank of England), usually intended to maximise growth while keeping inflation and unemployment down. To summarise macroeconomic policy involves three initial steps: . The determination of the policy objectives and the conflicts between objectives. 2. The formulation of policies, which are known as instruments, are consistent with attaining the objectives. 3. Some elementary cost-benefit calculations of policy effectiveness to ensure that the net benefits outweigh the costs involved. The four major objectives of macroeconomic policy are2: * Full employment- unemployment is to be avoided because it results in a decrease of output in the economy. In addition, unemployment reduces the incomes of former workers, increases poverty and leads to demoralisation among the unemployed. * Price stability- inflation is regarded as a major source of concern because it confers few benefits but imposes major costs on society. For example, people on fixed incomes suffer a fall in their standard of living;
'Less than credible stabilisation will not eliminate inertia and will generate real exchange rate overvaluation'.
'Less than credible stabilisation will not eliminate inertia and will generate real exchange rate overvaluation' Inflationary pressures persistently dog every type of economy across the world. However, the pressures are typically much higher amongst many developing counties. In many cases, aside from the lack of necessary economic tools required to combat inflation, a major component in the constraints faced by these countries is the issue of credibility. In this essay I will focus on the role that credibility plays within various stabilisation programs, and more specifically the effect that it has on inflationary inertia and on the real exchange rate. This will be done by looking at the different types of stabilisation programs that have been used, the causes of a lack of credibility of these programs, the steps that governments can take to increase the credibility of its schemes, and finally a conclusion will be drawn regarding the links between credibility and both inflationary inertia and exchange rate overvaluation. Firstly though, it is worth looking at the scope of the effects that inflation has across the world. While the western hemisphere is in no way immune to the threat of inflation, it is true that high levels of inflation are much more widespread amongst developing countries where, as Agenor and Montiel (1996) show sustained inflation rates of over 25% have
Managing the Economy.
Managing the Economy . Outline how fiscal policy can be used to raise the level of aggregate demand. 2. Using aggregate demand and/or supply analysis outline the effect of each of the following on the level of real GDP and the price level in the UK: (1) a fall in GDP in the rest of Europe, (2) a rise in UK consumer confidence. 3. Using Aggregate demand and supply analysis, assess monetary policy's and fiscal policy's role in correcting an economy experiencing rapid inflation Fiscal policy involves the government using taxation and expenditure to manipulate aggregate demand and influence the overall level of economic activity. Aggregate demand is the total nominal demand or expenditure on products by consumers, governments, foreigners, and producers within an economy over a specified period of time. Before Keynes, governments had budgets but they did not use fiscal policy. After Keynes's ideas were adopted, governments felt empowered to act against the fluctuations in economic activity by stabilizing the economy at full employment. This meant budgeting for a deficit when the economy was turning down to lower prices, incomes and unemployment, and budgeting for a surplus when the economy was expanding too rapidly and inflation was threatening. Fiscal policies include; lower direct taxes (causing a rise in disposable income), higher Government spending, and an increase in
Discuss the view that minimum wage legislation leads to unemployment. Has this been the recent experience of the UK?
Discuss the view that minimum wage legislation leads to unemployment. Has this been the recent experience of the UK? Minimum wage legislation is often contemplated by governments as a way of combating poor wages and the poverty that typically accompanies these wages. This is a direct form of government intervention and its use causes a great deal of debate, particularly from Classical (or free market) economists. Free Market economists argue that the minimum wage causes unemployment. This paper will discuss the argument that minimum wage causes unemployment and go on to analyse whether this has been the case in the UK over recent years. When a government introduces a minimum wage it sets a wage level to which every worker is entitled. Any employer which pays less than this minimum wage does so only by breaking the law. A minimum wage only has an effect if placed above the market equilibrium as can be seen in Fig.1. When the minimum wage is implemented the supply of workers increases as more are willing to work for the higher wage and we move up the labour supply curve. At the same time employers are less able to afford as many workers at the higher wage level and reduce the amount of workers that they employ. As is seen in Fig.1 there is a simultaneous move up the labour demand curve. The introduction of the minimum wage has therefore created unemployment of QaQb. Fig.1
What are the Government's main economic objectives?
Principles of Macroeconomic Coursework - Pre-Budget Report 2003 . What are the Government's main economic objectives? As ever, the government holds a number of ongoing, long-term objectives: high, stable and long-term levels of economic growth and employment; low and controlled levels of inflation; fiscal rules, concerning the current account and net national debt. Additionally they aim to achieve more short-term objectives, such as supporting war in Iraq. Although these objectives may remain constant from year to year and between parties, approaches to achieving these goals may vary. The Government and the Chancellor of the Exchequer may aim to achieve economic growth and employment through a number of means. Their chosen route will to a large extent depend on their economic tendencies: whether they favour Keynesian demand management or classical theory. If they follow Keynesian beliefs then growth and employment is likely to be achieved through increasing aggregate demand by controlling fiscal and monetary policy. As interest rates are now controlled by the Bank of England, this leaves increased consumer spending and reduction in taxes as their likely options. By increasing investment the government would hope to use the multiplier affect to increase output, thus representing growth and also create increased employment opportunities. Taxes may be reduced to increase the
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 =
What were the effects of the 2003 budget?
Introduction In this coursework I have been asked what were the effects of the 2003 budget are. In this coursework I will be analyzing and looking at the budget of 2003 and see if "everyone benefited from the budget". In the following coursework I will be finding out whether everyone benefited form the budget of 2003. When completing this coursework research is the most important thing that I need to do so that I can then focus on whether or not everyone benefited from the budget. In order to this I will first have carry out surveys and then from this I can then produce my coursework. I have followed a structure which has helped me to structure my coursework. The following structure was used in the coursework * Introduction * Background * Research Section * Theory Section * Conclusion /Evaluation * Bibliography and finally I will have a series of Appendices I would expect that last years would affect ,any people and tin this coursework I will asses whether people benefited from the budget or not. Overall many people would have been affected by the budget. Firstly I would say that people that drink spirits and wines did not benefit this is because taxes on beer and wine went up by a total of 5p. On the other hand some people that benefited from the budget these p[people were the pensioner as the pensioners over 80 would get an extra #100 and this would help
Macroeconomic Impact on Business Operations
Macroeconomic Impact on Business Operations Introduction Macroeconomics is the study of the economy as a whole. A thriving economy will create money and produce goods and services for consumption. Economic systems are influenced by macroeconomic factors. A country will strive for sustainable economic growth to improve the standard of living for its citizens. Fiscal and monetary policy is used to influence the economy. A well-defined monetary policy has the ability to control an economy and produce sustainable growth. Money Creation Money can be created by a government printing more money or through the banking system. When a government prints more money and spends this in the economy, the actual value of each unit of money already in the economy falls. This reduction of value for each unit of money is known as inflation. When a government prints money to finance a war or other purpose, hyper-inflation usually occurs. One unit of money in the current period is worth substantially less in a near future period. Creating money in this manner is not good for an economy. A better way to create money is to use the banking system. In the United States, the banking system must keep reserves (amounts of money based on deposit levels at the Federal Reserve Bank in non-interest bearing accounts that can not be used for any other purpose) When a bank makes a loan to an individual or
Examine possible factors which might have led to changes in the value of the pound sterling against the Euro in recent years.
Unit Six Essay Examine possible factors which might have led to changes in the value of the pound sterling against the Euro in recent years. Since the inception of the Euro in 1999, its relative strength to other currencies has fluctuated largely. In the first few years, confidence in the euro was very weak and its value relative to other major currencies fell significantly. The dotcom crash in the following years and problems due to the relative changeover caused confidence in the currency to tumble significantly. Nevertheless, all new currencies face this problem in the first few years, after the initial teething problems the Euro has gained significantly in strength; to the point that it is becoming a more and more popular reserve currency especially due to the recent decline in the value of the dollar and fund managers hedging against the dollar into commodities. The main thing that determines the value of a floating currency such as the Euro is the confidence that traders place in the currency given that the Euro is traded on the Forex to determine its value. The Euro has strengthened due to increased confidence from traders in conjunction with effective monetary policy by the European Central Bank. The European Monetary Union has enforced many countries to undertake changes to the structure of the economy. Globalisation and immigration has also been a
