Discuss the benefits of economic growth Economic growth is simply, in the short run, the rise in real GDP due to rise in aggregate demand: and in the long run an increase in productive capacity (the maximum output that the economy can produce), meaning that the Factors of Production are either more efficiently used or more are discovered or found. Governments tend to try and achieve economic growth as it has many advantages, one of which is higher employment levels, which incidentally should lead to a decrease in unemployment. If more people who are willing and able to work in a country have a job (and therefore earning an income) the GDP of that country will inevitably increase and so if this high employment rate is stable and sustainable, economic growth, in the long run, will occur. Hence, employment figures could be seen as proportional to the GDP of a country. The employed workers are a Factor of Production called the labour force. If there is unemployment, then our Factors of Production are not being used as efficiently as possible and so the point on the Production Possibility Frontier will not be on the frontier itself, indicating that economic growth is not occurring as the productive capacity will not be increasing. However, if low levels of unemployment are sustained consistently, then you are using at least one Factor of Production to its full extent and so the
You are to produce a report on the subject the balance of payments and exchange rates. In it you need to define what the various terms mean and examine critically their importance to the UK economy. You should concentrate on their role in how the economy
Economic Assignment 4 You are to produce a report on the subject the balance of payments and exchange rates. In it you need to define what the various terms mean and examine critically their importance to the UK economy. You should concentrate on their role in how the economy performs how government policy is or should be affected by them and those trends that should be of concern to policy-makers. 26 April 2010 The balances of payments (BOP) and the exchange rate both plays a large role in the UK economy having a record of each year's financial transaction between the UK and the international economy that has trade with UK. The total cash flow is then split into 3 sections the current, capital and financial account, in "the current account measuring trade in goods and services and net investment incomes and transfers whilst the capital account tracks capital flows in and out of the UK". (http://tutor2u.net) Later in the essay I will show how exchange rate wills determine the amount of import and export in the country, and advantage and disadvantage of having a strong currency. There is also 3 main polices that will be affected by balance of payment, supply side polices which is the key polices its job is to try to push long term aggregate supply outwards, monetary policy reduce the aggregate demand and consumer spending for short term aid and fiscal policy will also use to
THE UK FISCAL POLICY Alleyn and Viny (Wang xiao yang) (Liu xing) CN: GZ-02-029 GZ-02-0 Instructor David 2003 June 30th Table of contains Abstract Introduction 2 Result and analysis 2 Taxation 2 The direct tax 4 The indirect tax 4 Government spending 5 Recommendation and conclusion 6 References Abstract Fiscal policy was relatively popular during the 1940s and 1970s. Generally, it is the use of taxation and government spending to manage the economy. In the UK today, the rate of direct taxes have been brought down over the past two decades, though the field was paradoxically increased, and there is a shift of the balance of taxation from direct tax to indirect tax. Also, the government spending has been increasing, which is well illustrated by the increasing PSBR (public sector borrowing requirement). Generally, the main reason of these changes will be shown in the paper. Generally, government usually has conflicting objectives be using the fiscal policy. For example, keeping balance of payment equilibrium may suppress the proper economic growth. Also, there may become technical problems. As a result, fiscal needs adjusting. Introduction The fiscal policy was widely used by government in many different countries around the world, during the 1940s and 1970s. And now it is a main
Explain the 3 economic questions that all economic questions that all economies face because of the basic economic problem. The basic economic problem is there are scarce resources to produce wants and needs of the people. So firms confront the three basic economic questions of what to produce, how to produce and for whom to produce. As we cannot produce everything, we need to decide what to produce and in what quantities. It determines the allocation of scarce resources amongst alternative uses. So we have to choose for example, whether to produce lots of goods and services, such as food, clothing and vehicles to improve our standard of living or whether we to produce lots of military hardware to improve our defenses. Since resources are scarce to produce unlimited wants we need to consider how resources can be used to produce best outcome. We need to consider how we can get the maximum use out of the resources available to us. But other issues beside purely economic concerns should be considered when deciding how to produce. For example, through slavery or forced labor we could produce more goods and services in an economy but there is a moral objection to such arrangement crop yielding could be increased through genetically modified plants but this may lead to damage to the ecosystem. Economist uses the term labor intensive and capital intensive to describe the
Nicole Tsui Economics Essay Discuss whether or not supply-side polices are the best for achieving economic growth. Economic growth is one of the main indicators of a country’s economic performance. The rate of economic growth measures the annual % increase in Real GDP. Boosting economic growth has been one of the aims of the government in order to promote a better society. It can be done by increasing aggregate demand (AD) or aggregate supply (AS) of an economy. To clarify my stance, I disagree supply-side policies are the best for achieving economic growth to a large extent. Although supply-side policies can help to increase labour force as well as economic growth in long run (shifting LRAS rightwards) through education and training, there is time lag in carrying out these policies. Also, imperfect information may mislead the government to carry out effective policies i.e. cutting taxes and reducing benefits. This may lead to greater budget deficit. Due to the uncertainties and risks when carrying out supply-side policies, it’s better for the government to increase AD. AD can be increased if the economy is below full employment level and there is spare capacity within the economy. In order to increase AD, the government can increase consumption expenditure (C), investment (I), government expenditure (G) and exports (X). One of the ways is to cut the tax and
This paper will begin by detailing the creation of money and then end with a description of the monetary policy combinations required to best achieve a balance between economic growth, low inflation, and a reasonable rate of unemployment.
Monetary Policy Introduction Macroeconomics is the study of the behavior of the economy as a whole and consists of numerous factors such as national output (measured by gross domestic product or GDP), unemployment, inflation rates, and interest rates. The following paper will discuss monetary policy and its effect on the macroeconomic factors. This paper will begin, however, by detailing the creation of money and then end with a description of the monetary policy combinations required to best achieve a balance between economic growth, low inflation, and a reasonable rate of unemployment. Creation of Money According to McConnell & Brue, “the narrowest definition of the U.S. money supply is called M1” (2004) and consists of the currency and all checkable deposits. Currency is embodied by the physical tender in the hands of the public – Federal Reserve Notes, created by the U.S. Bureau of Engraving, and coins, created by the U.S. Mint. The creation of checkable deposits is accomplished, contrary to logical assumptions, through loans issued by commercial banks and thrifts. The method in which this is accomplished is in lending money in response to an IOU note. A consumer or business, for example, may request to borrow funds from a bank in the amount of $10,000. A review of credit history and the current financial portfolio allows the bank to accept the borrower’s
Evaluate the effectiveness of Thailand’s outward looking strategies  Over the past two decades, according to the article, Thailand has experienced “limits of an inward-looking approach.” Inward looking strategies include import substitution which is the replacement of imports with domestically produced manufactured goods, and protectionism – Using protectionism and import substitution to protect domestic industries from foreign competition. During the first half of the 1970s, much of Thailand’s economic growth was driven through domestic demand. This allowed the country’s economy to diversify in a controlled way until it has built a strong domestic base – most effective where a country’s domestic market is large enough to enable industries to benefit from economies of scale because there is less competition. Once achieved, industry will be strong enough to cope with foreign competition. This inward looking policy had real success with annual growth reaching around 6%. It would seem that this was extremely effective for the measures that the Thai government introduced it for (protecting grassroots companies), however, there are some downsides to inward looking policies such as comparative advantage being distorted. This means that within Thailand resources would not have been allocated efficiently. Also, the distinct lack of competition from foreign
Discuss whether planning has any role to play in the allocation of resources in a modern mixed economic system
Discuss whether planning has any role to play in the allocation of resources in a modern mixed economic system(12) ZLA mixed economy comprises of a market economy and a command economy. It has elements of both public and private sectors to ensure the economic growth of a country. Both sectors share the limited resources in the country. The private sector would mainly produce goods according to the price mechanism as they adopt a profit maximizing behaviour. When the demand for a product is high, the price increase would act as a signal to firms to produce more of the product as they would obtain more profit. Factors that may influence demand of a product to increase includes income, interest rates, price of substitutes. If consumer’s income increases, the demand will increase. However, if interest rates increases, consumers would save more, hence the demand would decrease, producers may then switch to produce other products with higher demand and prices. Public Sector would also be influenced by the change in supply. When cost of production increases, firms tend to spend less on producing that product. In a private sector, resources are allocated in three ways. Producers will have to choose what to produce, for whom to produce and how best to produce. This is due to economic problem of scarce resources in relation to unlimited wants. However, the public sector’s role
Discuss whether it is desirable for a country to specialise in the production and export of a single good.
Discuss whether it is desirable for a country to specialise in the production and export of a single good. (6) Specialization refers to an individual, firm or nation that concentrate on producing a single good and service which they have an advantage. This has many benefits as it allows expansion in output when countries produce what they have comparative advantage of. Countries can then exchange the surplus produced for other goods. This is because firms to achieve economies of scale as cost of production can be lowered. Workers may be more productive if they were to focus on producing one product. This would also allow workers to adopt specialist skills more quickly and save time as they do not need to move about or constantly change tasks. An expansion in trade would allow countries to produce what they are best at hence would lead to a massive expansion in the world living standards. zl However, if a country does chooses to produce a single good, there are certain disadvantages. For example, the country may be dependent on the export revenue of that good alone which may be insufficient, or risky as it is vulnerable to changes in price. If consumer’s demand of the good decreases due to change in taste or income, this may have a direct and major impact on the country’s economy. Also, it is possible for worker’s specialist skills and accumulated experience to become
Discuss the view that governments of countries with large budget deficits should take measures to reduce them as quickly as possible
Discuss the view that governments of countries with large budget deficits should take measures to reduce them as quickly as possible (15 marks) A budget deficit is where public expenditure by the government exceeds the total money collated through tax revenues. Fiscal policy refers to the use of government expenditure and taxation in order to influence the level of economic activity in a country. From the 1980s until 2008, its primary role was to ensure stable public finances. However, from 2008 and the financial crisis it has once again assumed a role in macroeconomic management not only in the UK but also in China, the USA and a variety of other countries. Fiscal policy and budget deficits are linked as government expenditure is a component of fiscal policy and so in order to stimulate economic growth many fiscal policies mean an increase in government spending, which may induce a budget deficit if tax receipts remain the same or decline in relation to the amount being spent. One of the methods in which a country can reduce its budget deficit is by simply reducing government spending, so in relation the money it receives through taxes, the proportion which is being spent becomes smaller and the deficit decreases and works towards becoming a surplus. For example cuts in certain areas such as healthcare and education would help to save money and reduce the government’s