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University Degree: Macroeconomics
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- Marked by Teachers essays 2
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.
Good conclusions usually refer back to the question or title and address it directly - for example by using key words from the title.
How well do you think these conclusions address the title or question? Answering these questions should help you find out.
- Do they use key words from the title or question?
- Do they answer the question directly?
- Can you work out the question or title just by reading the conclusion?
"Keynesian policies are incompatible with price stability" "Monetarist's policies are incompatible with full employment". Discuss the validity of these two statements.
* Human development theory
o Green economics & welfare economics
* Labour is more than a stock of a factor of production and as a social scientist the results of a laissez faire approach leads to many social and economic ills as found in the periods where only monetarist's policies have been applied such as during the eighties where all efforts were put into combating inflation. Inflation came down at the price of unemployment doubling, output and investment dropping. Eventually in 1986 Bank of England abandoned monetarism.
* The danger of policies which only give weight to long run outcomes risk the real or actual short run problems like poverty and geographical inequalities which are not necessarily considered as a macroeconomic objective for free market advocates. These in turn lead to massive fluctuations in output and economic well being.
* Full employment and price stability cannot be attained at the same time, at least not with monetary and fiscal policies. A trade off between inflation and unemployment have to be made in achieving macroeconomic objectives.
Discuss the benefits and problems of the European single currency, the Euro
"In conclusion, the unique nature of the Euro, as a single currency operating across different national economies with different national legislation, means that the impact of a strong exchange rate is somewhat different than the impact on other countries. Whilst the Eurozone is experiencing the usual loss of competitiveness of its exports, and increasing competitiveness of imports, the diverse nature of the national economies is helping to mitigate this in some areas. In addition, the strength of the Euro has assisted structural reforms in countries such as Italy, whilst exposing structural weakness in nations such as Ireland, thus having a dynamic impact on the distribution of wealth and competitiveness inside the Eurozone."
Using IS/LM model, discuss the extent to which price flexibility can return and economy to full employment. Explain how the analysis can help account for Japan's recent slump.
"In conclusion, the Keynesians have taken the view that flexible prices are independent of the full economy and that prices adjust slowly so economy does not reach full equilibrium. However, the Classical view took the stance that prices adjust rapidly to full employment equilibrium. The general equilibrium being where the FE line intersects the LM and IS. When price is adjusted, this changes real money supply (M/P) and the LM curve to shift till it meets the point where IS curve and FE line intersect. This in fact, can be juxtaposed with the Japanese liquidity trap where they deemed to shift the economy back to full employment using a combination of policies and at the same without violating the requirements of the nominal interest not going below zero."