This report will highlight how Government policy could change to try to: Increase economic growth, Reduce unemployment, Reduce the Balance of Payments deficit, Reduce the inflation to 2.5%.
ANGLIA POLYTECHNIC UNIVERSITY ASHCROFT INTERNATIONAL BUSINESS SCHOOL BUSINESS STUDIES SET SEMESTER 2 MODULE NAME: MACRO ECONOMICS Student Name: Gwyneth Morris-Alexander Student Number: 0272195 To: Chancellor of the Exchequer From: Gwyneth Morris-Alexander Subject: Report on the Economy Date: May 10 2003 Dear Sir, The following report is based on the information stated as it relates to the topics indicated: > Inflation is 3% and the stated aim of Government is 2.5%. > Unemployment is 8%.........the Natural Rate is estimated to be 5%. > The Balance of Trade is in significant deficit. > The Marginal Propensity to Import is 0.5. > The Marginal Propensity to spend is 0.8. > There is presently a Budget Surplus of £2bn. This report will highlight how Government policy could change to try to: * Increase economic growth * Reduce unemployment * Reduce the Balance of Payments deficit * Reduce the inflation to 2.5% We must, however, first take note that there are different approaches to economics. The Keynesian Approach believes that the active use of monetary and fiscal policy can be effective in stabilising the economy. Keynesians tend to focus on a mixture of exogenous rises in consumer demand or excessive fiscal expansion and cost-push factors such as higher wage demands. According to this approach, changes in the national income determine consumption
The Consumer price index
The consumer price index is a weighted price which measures the monthly change in goods and services. The spending patterns on which the index is weighted are revised each year, information is usually taken from the family expenditure survey. Higher income households and pensioners are not included. The changes in category weighting reflects a significant shift in the spending patterns of households in the U.K .) The rate of inflation is the % change in the price index from one year to another. If in 2009 the price index is 104.1 and in 2010 the price index has risen to 112.5, then the annual rate of inflation = (112.5 - 104.1) divided by 104.1 then x 100. In this case the rate of inflation would be = 8.07%. The CPI inflation for one item is calculated by taking the updated cost of the product and dividing it by the base price of the product then multiplying this figure by 100. To calculate the C.P.I for multiple items are calculated by adding up the prices of all of the items in the month from the number of stores, rental units are added together and averaged. This figure is weighted into the categories in the CPI e.g Housing 40%, Food and Non-Alcoholic Beverages 20%, Taxes are at 43% but not calculated. The C.P.I is split into 12 categories including food and non alcoholic drinks, clothing and footwear and housing. A typical household spends around 30% of their
Comparing the effects of immigration on GDP in Malaysia, Japan and South Africa.
.0 Introduction Lately, there are a lot of immigrants or foreign labour force residing in many countries either legally or illegally. The International Organization for Migration (IOM) states that there are more than 200 million of migrants globally. The number of immigrants especially in developing countries and developed countries increase very rapidly. According to the United Nations, majority of the migrants are come from Asia. Malaysia has hosted more than one million of foreign immigrants, mostly from Indonesia, Bangladesh, Thailand, Myanmar and Philippines while Japan is home for immigrants from Vietnam, China and Myanmar. On the other hand, South Africa has many refugees and asylum seekers residing in it. The existence of immigrants would have played a vital role in the economy. They have contributed quite a large portion to the Gross Domestic Product (GDP). We are now going to analyze on the economic condition of Japan which is a developed country, Malaysia as a developing country, and South Africa as an undeveloped country. Analysis on immigrants' contribution on the economic condition will be done. 2.0 Japan 2.1 Gross Domestic Product (GDP) from 2000 to 2008 Please refer to Attachment 1.0. It is a table of Gross Domestic Product of Japan since 2000 to 2008. The GDP of Japan shows increase since year 2000 to 2007. However, it suddenly declined 2.74% at
Consumers, Firms and Techniques of Production - making economic choices.
Consumers, Firms and Techniques of Production Economics focuses on choices and following consequences, as well as how individuals and the societies try to satisfy human's infinite needs and wants because the resources available to meet them are scarce, is say, choices are inevitable (Marks, 2012). According to Anderton (2008), resources which are scarce are called economic goods. However, not all resources are scarce. Those resources are called free goods. For example, the air we breathe Economics is known as a combination of microeconomics and macroeconomics. In this essay, the topic is a discussion focuses on consumers, firms and techniques of production bases on microeconomics. Scarcity - the basic economic problem - can be dealt with three simple questions: what goods should be produced, how goods should be produced, and for whom will those goods be produced (Sloman, 2006)? There are three types of economic system differ in what their solutions to these three basic economic problems. They are free market, planned market, and mixed market. Once one choice has been considered will be the 'best' one and take it, all the other choices will have to be given up. The benefit lost from that missed next 'best' choice is called the opportunity cost (Anderton, 2008). For instance, you may have enough money to buy one of your favourite magazines - magazaine A or magazine B. If you
Evaluate the use of supply side policies in raising the level of real output in an economy which is near to full employment
Question: Evaluate the use of supply side policies in raising the level of real output in an economy which is near to full employment. Answer A supply side policy is one which attempts to improve incentives and productivity in an economy (so increasing the productive potential of the economy) thereby shifting the LRAS to the right. An example of a supply side policy would be to lower certain taxes (for example high income tax leads to less people working and high corporation tax can reduce incentives of firms to make profits) to raise the LRAS. Improved education and training is another supply side policy as it raises the level of human capital, therefore resulting in a rise in LRAS. Privatisation gives firms a profit incentive, which increases efficiency, also shifting LRAS to the right. All these policies will result in an increase of LRAS from LRAS1 to LRAS2. This will increase the real output from RO1 to RO2 and will decrease the price level from Pl1 to Pl2. The economy here is at Full Employment as the level of aggregate demand is at the level where the LRAS curve is vertical. The increase in LRAS has a favourable effect on inflation as price level decreases. However, improved education and training involves an opportunity cost as the money could be spent elsewhere. Also, there is a time lag before the full effects are seen, and there is no guarantee that the
ECONOMICS PAST PAPER QUESTIONS WITH ANSWERS - price elasticity and inflation.
ECONOMICS PAST PAPER QUESTIONS WITH ANSWERS. Q1) Discuss whether inflation is necessarily harmful. (12) ANS 1:- Inflation is usually defined as a situation in which there is a persistent increase in the general price level. During inflation, cost of living rises, and hence, the purchasing power or the value of money falls. Usually inflation is an evil to an economy, and hence, reducing inflation is one of the macro-economic aims of every government. However, the effects of inflation depend on its level, whether it is constant or accelerating and whether it is anticipated or unanticipated. There are lots of economic costs associated with inflation:- . Shoe-leather costs: High rates of inflation mean that people and companies may lose considerable purchasing power if they keep money lying idle and not earning interest. Inflation erodes the value of cash and therefore, firms and households prefer to hold less cash but more interest bearing deposits / assets. Shoe leather costs are the costs involved in moving money from one financial asset to another in search of the highest rate of interest. 2. Menus costs: Firms will also suffer from menu costs. These are the costs involved in changing prices. For examples, firms have to incur costs by changing price labels or prices in catalogues (new price lists) or on menus or to adjust slot machines. 3. Redistribution:
What steps were taken to tackle Germany's economic problems between the Nazi takeover in 1933 & the decline in Schat's influence in 1936
What steps were taken to tackle Germany's economic problems between the Nazi takeover in 1933 & the decline in Schact's influence in 1936? In 1933 Germany's economic problems were extensive. At this point in time Hitler's personal preference was to decrease unemployment, yet this problem was fairly insignificant alongside sorting out the economy in links with industry, the balance of trade deficit, inflation, & the debts of World War I. I intend to focus upon the main issues & link together the measures taken to make an appropriate conclusion on the successes and failures. The balance of trade deficit was of high concern; values of exports were lower than the value of imports. Germany was loosing money & a quick solution was needed to regain as much as possible. To combat this the New Plan was structured & emplaced by 1934. the government were given strong powers in controlling imports which helped to overcome the immediate balance of trade problem. Also in linking problems with an economic & industrial view the balance of trade deficit partnered well in annoyance with the shortage of raw materials & a scarcity of foreign currency, which led to the non payments for many imports. To solve this the Bilateral trade agreements were made, with specific links to the Balkan states. This allowed Germany to be supplied with important raw materials, & include some barter so as not
Discuss the economic effects of a reduction in unemployment
Discuss the economic effects of a reduction in unemployment (18) One of the main government policy objectives is high employment or most of the countries even aim for full employment, which is a term for unemployment at 3%. This is because government acknowledges that employment benefits individuals, government itself and in most cases the whole society, as it can cause a sustainable economic growth and raise people's material standard of living. However, every single country has some degree of unemployment, as it is impossible to avoid, so government uses different policies to reduce as much unemployment as possible. These policies are demand side policy, which is increasing the AD to reduce unemployment and supply side policy which means increasing the AS using different methods and with it increasing the need of the labour. Using these two policies the unemployment will be reduced and the effect of reducing the unemployment is usually beneficial rather than detrimental, but I will discuss both sides in this essay. The most apparent and significant effect of the reduction in unemployment is the gain in output, as more people who are willing and able to work are working and this means that the country will be using the resources more efficiently. This will lead to a higher production in goods and services and increasing the material living standards. We can present this
Macroeconomic Objectives - Notes on the Autumn Speech by George Osborne
James Weir Notes on the Autumn Speech by George Osborne Tuesday 29th November 2011 Macro-economic Objectives: . Economic Growth: The following policies that George Osborne mentioned to try and stimulate economic growth are the following: * Firstly the government is planning to invest £5 billion over the next three years on improving the UK's roads and rail networks. Osborne feels that by having a better transport network throughout the UK, all the regions will be better connected therefore improving enterprise in the UK. This will extend economic growth because goods can be more easily transported. * Business rates relief extended for small businesses until April 2013. This means the small firms can invest more in other goods and services. This improves economic growth because it stimulates and improves business confidence, which means they will invest more and investment is a small section of Aggregate Demand. * The Chancellor announced a £1 billion finance partnership with pension funds and insurance companies to provide financial assistance to the UK businesses. This will stimulate economic growth by encouraging firms to invest and this will increase AD. * Osborne has announced a credit easing programmed for small and medium enterprises worth up to £40 billion over the next two years. Credit easing makes it easier for people to borrow money which is what the
Current UK economic policies. Government management of the economy is a key political issue and each government sets targets and objectives. These are: stable economic growth, low stable inflation and low unemployment rates.
Government management of the economy is a key political issue and each government sets targets and objectives. These are: stable economic growth, low stable inflation and low unemployment rates. UK government, similarly to all governments around the world, uses different policies to achieve the main objectives listed above. Economic growth can be achieved by using policies in the short and long run. One of the policies that can be used is a monetary policy. In theory, reflationary monetary policy is to reduce interest rates. The lower the interest rates are, the higher economic growth is. What is more, it increases bank lending. People are more likely to borrow money from banks as they feel confident. This is because of the low interest rates and the awareness that they do not have to give back much more than they had lent before. Moreover, reflationary policy lowers value of LSterling because the value of UK currency becomes cheaper in comparison to other currency's. All these factors causes an increase in AD and overall the economic growth. Another short-run policy to increase economic growth to the UK objective level, i.e. 2.25%, is a fiscal policy. A reflationary fiscal policy is used and results in reducing taxes and raising government spending. Reduction in taxes cause that people have more money to consume. As a result they spend more. Government spending increases