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University Degree: Macroeconomics
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This increased the power both economically and politically for the European Union, as there are gains in prestige and political power associated with a common monetary policy.2(Tsoukalis) The European Union is now compared relatively with America as a large economic power with a single currency; this makes trading with the rest of the world easier as it will "increase the relative political weight of the countries involved with EMU"3(p12). The EU can use this new power to become more confrontational in world affairs.
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By plotting these to curves, we can calculate the equilibrium rate of interest, and would be able to see it move in relation to changes in the economic environment, such as a rise in the demand for capital equipment due to an improvement in technology. If this were the case then there would be an increase in the demand for loanable funds and the demand curve would shift to the right, increasing the interest rate and therefore encouraging a higher level of savings.
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Who and what determines the interest rate Summaries of the processes by which monetary policy is commanded are readily accessible in Budd (1998) and in retrospect, King (1997, 2002). The Monetary Policy Committee (MPC) of the Bank of England has the responsibility for setting interest rates is currently held. The MPC has nine members including the Governor, two Executive Directors, and two Deputy Governors, responsible for monetary policy analysis and monetary policy operations. Other four 'external' members are appointed by the Chancellor of the Exchequer with 'experience and knowledge, which is likely to be relevant to the committee's functions.
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Explain the concept of Price Elasticity of Demand and discuss its relevance for Business and Government.
Demand can be judged to be relatively elastic, relatively inelastic or unitary elastic and can be represented as a figure. It is common for all goods to experience an increase in demand from a decrease in price, however if the reduction in price leads to a more than proportionate change in quantity demanded, it is said that demand very sensitive to price changes. Therefore, the demand is relatively elastic and the price elasticity would be greater than one. On the other hand, if there has been a less than proportionate change in quantity demanded, it indicates that it is not very responsive to price changes; thus demand is relatively inelastic and the price elasticity would be between zero and one.
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The loss of a job would mean lower living standards and often a fall in their self-esteem. Moreover, involuntary unemployment also harms the whole economy, as they are not contributing to the economy's production and potential output is wasted; they are viewed as the burden of the economy and adversely affect the growth of the country (Lipsey et al, 2007). As a result, unemployment is a recurring debated matter of governments. There are two main types of unemployment, equilibrium and disequilibrium unemployment. Keynesian unemployment is often referred as demand deficient or cyclical unemployment and is categorized to being in disequilibrium; this is where "real wage rates in the economy are above the equilibrium level" (Sloman et al, 2010).
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Macroeconomics questions - Supply and demand of labour, effects of a minimum wage, labour force participation in Australia.
Minimum wage laws prescribe the lowest hourly wage that employers must pay to workers. The demand and supply model shows that this law must raise the unemployment rate. The real wage is when the quantity of labour demanded equals the quantity of labour supplied (X). If a minimum wage is imposed (Wm) that exceeds the market clearing wage, then the number of people who want jobs exceeds the number of people who are willing to hire, thus creating unemployment. D S Wm X This law benefits especially low skilled workers, who would have not otherwise earned more.
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Macroeconomics- Demand and Supply of Money, Monetary Policy and Whether the Australian Government should tighten monetary policy.
Thus, a higher price level is associated with a higher demand for money. c) Real output Rising real incomes and increasing numbers of people employed will increase the demand for money at each rate of interest. An increase of real output raises the quantity of goods and services that people and businesses want to buy and sell. To accommodate the increase in transactions, both individuals and businesses tend to hold more money. (ii) Define monetary policy. Discuss the possible channels by which monetary policy might affect the economy?
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Describe types of unemployment and their causes. Explain Keynesian and classical assumptions in relation to the types of unemployment
People who are considered unemployed are those who are seeking work or lay off for more than a week. There are many different reasons why a person could be unemployed. The government tries to find solutions in order to reduce unemployment by making up policies. The unemployment problem began in the 1990s. First, it resulted from the restructuring of economy. In the period of planned economy, the large-scale corporation is the most common production organization. But to the market economy, the most common one is the individual or small-scale corporation. The workers from the large-scale firms cannot adapt themselves to the production form of the individual or small-scale ones.
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Describe the macroeconomic performance of the UK economy over the past 40 years. How does this performance compare with other developed industrial economies?
Unemployment rates in the UK were as low as 2.2% change but rising to an average of 4.5% throughout the 1970-to 1979. The 1970's was a huge era during this time things started to change a lot economically the way of Keynesian economics was being scrapped and new ways were being brought in, in Britain this change was signified after conservatives won the vote in 1979 under the power of Margret Thatcher which although signaled change it wasn't for the better.
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The cost of production would include things such as land labour and capital all the initial costs the producer faces in making the good. The cost of living is the minimum or the fair cost of how much a person or a worker needs in surviving day to day. The cost of complying with fair trade standards is a key cost as producers are often monitored to ensure they are agreeing to their share of the deal. With the help of the Fair trade Labelling Organisation (FLO), an organisation, which ensures the fair trade name, is not being misused and people are complying with the standards of fair trade.
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It was mainly in charge of money supply and foreign exchange policies. Before it was nationalised during the 1600's ( http://www.bankofengland.co.uk/about/history/index.htm ) The Bank of England was appointed as the English government's bank. At this time, the Bank of England is in charge of monetary stability and financial stability. The instiution works along side the HM Treasury and many other international banks to make sure the economy remains stable and there is continuous growth. Just as the PBC works with the ministry of finance.
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When in a time sensitive situation, a leader will need to put their stamp of approval on the work being done to be assured that the job is done correctly. This leadership seemed most ineffective when trying to develop a strong sense of teamwork, when the team wants a more natural feel to the environment, or when the members of the group have some knowledge or skill for what they need to accomplish a job or project. While working at American Home Shield, this leadership style is definitely used.
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More so, Crowther, defines inflation as a state in which the value of money is falling. On the other hand, Deflation is the opposite of inflation. Here the level of prices is going down and consequently the value of money drops. Professor Paul Einzig in his book monetary policy defines deflation as "a state of disequilibrium in which a contraction of purchasing power tends to cause, or is the effect of a declining in the price level". An economy is experiencing deflation when it is in a period of falling prices and the output of work by productive agents increases relatively to money.
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Read through the February 2010 Bank of England Quarterly Report. Identify and explain which parts of their report correspond to a flexible-price model and which to a sticky-price (New Keynesian) model, and why.
However in the report it mentions of the government lowering VAT in order to help smooth the negative fluctuation of the business cycle. This may be attributed to countercyclical government policy, which aims to smooth tax distortions (Williamson 2008:412). By this it is meant that during a boom the government should allow total tax revenue to rise and during a recession allow total tax revenue to fall. GDP is expected to remain below the trend for a considerable period. This supports the Real Business Cycle Theory. One part of this theory states that the Solow residual has persistence (Williamson 2008:406).
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Lipsey. The theory he offered came from deriving the Phillips Curve from the labour market disequilibrium. He starts his analysis with defining both sides of the labour market. The demand for labour DL =E+V, where E is the number of people employed and V is the number of vacancies and the supply side comprises of SL=E+U, where U is the number of people unemployed. The difference between demand and supply is the excess demand for labour eDL=DL -SL or simply eDL=V-U. Figure 2 portrays the individual labour market. The money wage W is represented on the vertical axis.
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It is emphasized that increased productivity is the key to boosting real GDP per capita. A higher standard of living with a higher level of consumption, but the key to long-term Welfare is productivity. Productivity which consists of three factors of production: labour, materials, and capital. It measures the efficiency of people, capital resources and ideas which are combined in the economy. Total factor productivity is more comprehensive than labour productivity, but it is also more difficult to measure. The Human Development Index (HDI) offers a wide perspective on the question of how well people are living.
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Globalisation is also a combination of economic, technological, and political factors. Four indicators of globalisation were identified by Griffiths and Wall. The four identified where; New markets, new actors (institutions), new communications, new rules and norms. Many stress the idea that globalisation is not a new thing and so therefore it can be looked upon as a continuous development process in which changes takes place. Needle (2009) says "Globalisation is a process in which the world appears to be converging economically, politically and culturally.
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The current economic crisis has resulted in a recession. Discuss, taking account of economic theory, what the government can do to pull the country out of the recession.
The UK last faced recession in the 1990's. During this period, repossession was common and interest rates reached unprecedented amounts, often as high as 15%. The 1992 recession was overcome by a change of political power. The new year brought with it firm acceptance of the fact that the country was in recession once again. The government's view was that the recession, this time, could be attributed to a global downturn, and that financial events elsewhere were largely to blame.
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Then, it is said that it is easier for the public to understand and makes monetary policy more transparent. Inflation targeting was first introduced by New Zeland in 1990 and then many countries used this regime. Central Banks set as their only objective the price stability. It makes explicit the failure of money growth control policies where the target is equal to the objective due to the fact that the link between the intermediate and final objectives is uncertain. Any changes to the interest rate target are made in return to different market indicators in order to forecast economic trends as well as to keep the market on track in achieving the defined inflation target.
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Describe the benefits to international policy coordination as set out in the Hamada diagram. Why is time consistency so important if policy co-ordination is to be successful? Use diagrams to support your arguments.
This strategy then collapsed, and showed the global economy that policy coordination is to be an imperative part of the way we go about things. An economist called Koichi Hamada developed a model to help explain the main benefits for macroeconomic policy coordination. In this model, he takes two countries, assuming that both countries have two main objectives. These being that they want to achieve full employment, and that they want their trade balance to be equal to zero. One final assumption is that both countries can only use monetary policy to try and achieve their main objectives.
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Derive the LM schedule, explaining what are the main determinants of the slope and position of the LM schedule. Use the IS/LM model to explain the concept of liquidity trap.
of the interest rate. Resulting in a combination of the money Supply and the money Demand, this is shown below: Interest Rate (r) Money Supply r0 L(r) Real Money Balances (M/P) (M/P)0 As demonstrated above, you can see the money supply and money demand for real money balances with respect to the interest rate. With the fixed money supply curve to signify price stickiness and the function of the interest rate to signify the demand for real money balances. When an economy is in a stage of upturn, it can be said that Income has increased.
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Both the US and countries of the European Union make up the largest consumer markets in the world and therefore any impact on their economies would have a knock on effect on other smaller countries. This is a result of globalisation. There are a number of
The unemployment rate is inversely linked to changes in real GDP. Therefore as real GDP decreases, the unemployment rate increases. ("Aggregate demand and supply". 2008) In conclusion, a stock market crash leads to a fall in aggregate demand, which in turn increases unemployment. The current financial crisis has been called the most serious financial crisis since the Great Depression. It is believed that the crisis began in the US because many citizens took out mortgages, which they later couldn't pay back. This lead to many mortgage companies and bank losing large amounts of money and facing bankruptcy.
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Sales are declining are threat for tobacco industry. The research shows that only 22% of Britons are smokers - down from 27% at the end of the 1990s - and two-thirds say they would like to give up (ONS)1. ECONOMIC - The local, national and world economy impact * Exchange rates - are an opportunity and threat. Tobacco industry is affected by exchange rates when dealing with international trade, if the value of the currency falls in the country of a tobacco supplier this enables retailer to get more for their money or when importing the goods to their country,
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Third, the economy uncertainties discourage them to give birth due to no confident on their career prospects especially when there is economic recession. They fear about the low living standard and the incapability to raise children in the future, so they choose to save more and wait until they got enough confident on their financial situation to have children. In order to ensure enough supply of labour in the market for the next 10 to 20 years, there are some recommendations to the Hong Kong government.
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Recession - Explain the origins of the current crisis and the measures taken by the US authorities to resolve it.
From last year with some symptoms of the economic recession occurred, the world economy hold the toughest recession. There are many reasons which have lead to recession. The first cause is the credit crunch, which is the main reason leading to the recession of the US. The credit crunch refers to a sudden shortage of funds for lending, leading to a result of decline in loans available. And the sub-prime mortgage, which means mortgage companies give inappropriate mortgage to people who want to buy houses who have low incomes and poor credit.
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