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University Degree: Macroeconomics

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  1. 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).

    • Word count: 1438
  2. Macroeconomics Phillips Curve (year 2)

    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.

    • Word count: 1781
  3. GDPs Limit to measurement of welfare and happiness

    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.

    • Word count: 1203
  4. Business in Context - Globalisation

    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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  5. Communication Sector in Pakistan

    Radio Pakistan Broadcasting Corporation (PBC) has played a pivotal role in promoting national interest by providing information, entertainment and education to audiences at home and abroad in 35 languages (19 regional, 1 sub regional, 16 foreign) from 24 Radio Stations and 5 FM Stations. 3. Television First television station was introduced in Pakistan by a private television company, in November 26, 1964. In June 1967, it was converted into private limited company named as Pakistan Television Corporation Limited, with prime objectives to establish a Television Network in Pakistan for the provision of broadcasting news, documentaries, education and entertainment.

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  6. What are externalities, explain how congestion charges can improve social welfare

    There are four major types of externality; external costs of production, external benefits of production, external costs of consumption and external benefits of consumption. External costs of production arise from marginal social costs, examples being pollution caused from production of a good or service. The marginal social cost exceeds the marginal private cost (MSC>MC). The problems of external costs arise in a free market economy where no one has legal ownership of rivers or the air. This is where the government or local authorities are used to control such issues.

    • Word count: 998
  7. The economic performance of Iran 1997-2008.

    (Crane, Lal, Martini, 2008) The latter would need improving the subsidy distribution system to relieve the government of the huge financial burden on subsidy payments. The main driver of the Iranian economy is oil and since the oil bust of 1998-1999, the Iranian economy has grown rapidly. Between 1999 and 2006, GDP rose 49 percent, an average annual rate of 5.8 percent per year; per capita GDP has been rising at 5.3 percent per year. (Statistical Centre of Iran) Ever since, its yearly current account surpluses have ranged between a pitiful $860 million in 2003 and a record $20.65 billion in 2006.

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  8. The comparison of individual income tax in China and Ireland

    If he/she is non-resident but ordinarily resident, he/she is also liable to income tax on foreign income (other than foreign earnings) where that foreign income exceeds �3,810 in a year of assessment. (c) A non-resident individual, who is an Irish citizen, or, having been resident in the State, is now resident abroad for health reasons, may be entitled to a measure of income tax relief. (d) An individual who is domiciled abroad but who is resident in the State is taxed only on so much of his/her income which arises outside Ireland and the United Kingdom as is remitted to the State.

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  9. 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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  10. Explain how monetary policy works under an inflation targeting regime

    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.

    • Word count: 1356
  11. Discuss the benefits and problems of the European single currency, the Euro

    In addition, the creation of a European Central Bank to oversee monetary policy across the entire Eurozone, with a commitment to ensuring low inflation and consistent pricing throughout the zone, offers significant benefits. In particular, it offers significant benefits to nations which have poor track records in attempting to manage their internal inflation, as the connection to the other Eurozone economies will allow them to benefit from shared inflation pressures. As such, this also allows Europe a significant gain in macroeconomic stability, which the continent has arguably never experienced before.

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  12. Housing Market Mаny еcоnоmiѕtѕ thоught thаt whеn thе U.Ѕ. hоuѕing bооm еndеd, ѕо wоuld thе оvеrаll еc&#1

    m?j?r n?g?tiv? imp?ct ?f ? d?clining h?u?ing m?rk?t will n?t hi? until 2008. Th?r? will b? ??m? m?d??t d?clin? in th? r??l gr?wth thi? y??r ?nd n?xt, but ?n incr???? in r??l GDP (B??, 2006). GDP ?l?wd?wn m?y giv? F?d p?u??, ?cc?rding t? bu?in???w??k.c?m (?nglund, M. M?cD?n?ld R. 2006). Th? U.?. ?c?n?my gr?w ?t ? di??pp?inting 2.5% r?t? l??t qu?rt?r, r?i?ing m?rk?t ?xp?ct?ti?n? th?t th? F?d will ?u?p?nd int?r??t r?t? hik??. U.?. gr??? d?m??tic pr?duct f?r th? qu?rt?r und?rp?rf?rm?d. Th? und?rp?rf?rm?nc? ?f ??c?nd qu?rt?r GDP r?l?tiv? t? ?ur ?xp?ct?ti?n? w?? l?rg?ly ? functi?n ?f ? big fix?d inv??tm?nt du?

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  13. 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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  14. 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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  15. 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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  16. Pestle for UK brewing industry

    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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  17. Low birth rate

    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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  18. 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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  19. IS-LM and Toxic Debt

    This is known as a crowding out effect. With an increase in government spending some speculate a rise in taxes to compensate but seeing as the policy is to boost aggregate demand it is unlikely that there would be a vast increase in taxes. ii) Legislation to reduce the length of a working week is a policy based on the principle of sharing the current level of work throughout the working population. In order for this policy to work the current wage rate must increase to compensate for the fall in hours.

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  20. Fiscal And Monetary Policy

    Monetary policy on the other hand is defined as the policy used by the Reserve bank (Central Bank) to maintain price stability i.e. Keep inflation in check. E.g. The Governor of the Reserve Bank of New Zealand has a policy target agreement with New Zealand Government to keep inflation within 0 - 3%. The Reserve bank implements monetary policy by adjusting the reserve requirements i.e. allowing banks to hold a lower portion of their total assets in reserve or changing the Official Cash Rate (OCR). The OCR is an interest rate set by the Reserve bank on the cash settlement balances on the commercial banks that gets reviewed on a frequent basis E.g.

    • Word count: 3418
  21. Inflation and its solution

    This paper will basically discuss the concerns caused by high inflation, followed by the evaluation of policies can take to adjust this situation. Body -concerns when inflation is above RBA's target Figure1 (Bernanke,B.S & Olekalns, N & Frank,R.H 2008,P315) Inflation, is the tendency for the overall level of prices in an economy to rise through time (Bernanke,B.S & Olekalns, N & Frank,R.H 2008). The graphs above show the process of how the inflation occurs. Australian government and RBA agreed to target inflation rate of 2-3 per cent on average (Day, 2009, p40).

    • Word count: 1325
  22. Will Bury's Price Elasticity Scenario

    He has done quite a bit of research and discovered that individuals who make use of digital and audio books are affluent with above average incomes. Another interesting fact is that the same audience who downloads music to their digital devices is being drawn to digitally listening to books, therefore creating a market base for his product. He has economically theorized his data by systematically arranging, interpreting and generalizing the facts. He must bring order to the facts by arranging them in a cause-and-effect order.

    • Word count: 1167
  23. FDI and MNC Create More Multiplier Effect to The Host Economy As Compared To The Home Economy

    The major benefits associated with foreign investment include technology transfer, job creation and export development. Poor countries on average are helped by foreign investment in form of money, equipment, machines and factories, as well as infrastructure improvements such as roads and bridges. The potential drawbacks include the deterioration of the balance of payments as profits are repatriated, lack of positive linkages with local communities, and the environmental impact especially in the extractive and heavy industries, competition in national markets and the risk that host countries, especially small economies, may experience a loss of political sovereignty.

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  24. Student Inflation

    One group member also created an excel worksheet for the potential list of products in our basket. In a second meeting, the product list was refined into categories and each member chose two categories to monitor over the five week period. The issue of weighting the products accordingly was also discussed at this point. In the Week Three meeting, one member took on the role of report 'editor' for the final stages of the project. Group members were also allocated a written part of the project to work on. In Week Four the issue of calculating the weights of the products in the basket of goods was discussed again and a five week budget of �875 was established.

    • Word count: 5383

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