Aggregate Demand

"A country's standard of living depends upon its ability to produce goods and services." (Mankiw, N.G., 2001). In macroeconomics, aggregate demand is the total spending on goods and services produced in the economy over a period of time. This essay focuses on the aggregate demand. In the first part, the essay will give the definition of aggregate demand and explain it in details. In addition, the AD curve is included and analysed carefully. The second part is to explain the relationship between the level of aggregate demand and the rate of economic growth. There are four parts of AD to influence the growth of economy. Lastly, I will examine the relationship between aggregate supply and the rate of economic growth in the long-run. Aggregate demand equals C + I + G + (X - M). C indicates consumer spending on UK produced goods and services; I indicates investment spending in both public and private sector; G indicates government spending on other goods and services which excludes transfer payments because they are not a payment to a factor of production for output produced; X indicates exports, which equals overseas spending on UK produced output; M indicates imports, which is the UK spending on overseas output. The circular flow of income illustrates the linkages between these different elements and depicts the flows of money around the economy. "The British economy comprises

  • Word count: 1873
  • Level: University Degree
  • Subject: Business and Administrative studies
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Balance of Payments

TABLE OF CONTENT Introduction 2 Economic implications dealing trade deficits 2 Policies to reduce a current account deficit 5 Conclusion 8 Bibliography 9 Balance of Payments The international trade in goods and services between countries has increased significantly over the past fifty years. Specialization by each nation has made every country to engage in international trade and hence to maintain balance of payments. The balance of payments is a comprehensive systematic record of a country's financial dealings with the rest of the world over a period of one year. This evaluates all payments among a country and its trading associates. The balance of payment account is divided into two sections, namely current and capital account. Thus the current account consisting the exports and imports of goods and services, net income flow, as well as transfer payments such as foreign aid grants. The current account balance is the accumulation of the balance of trade plus the interest, dividends, profits and transfers. On the other hand, capital account includes all the capital flows such as direct investment, financial investment, currency trading. At the end of the period the current account of the balance of payment can either have a trade deficit or a trade surplus in its accounts. A trade deficit would suggest that the exports are less than imports and a surplus would

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  • Level: University Degree
  • Subject: Business and Administrative studies
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"Can financial markets ever be considered to be truly efficient; given that insider trading is prohibited in a number of jurisdictions? Further, what might have been the pitfalls and the benefits of relaxing insider trading prohibitions?

Front page AC32820 – Financial markets and institutions assignment Total word count - 1984 Assignment Question: "Can financial markets ever be considered to be truly efficient; given that insider trading is prohibited in a number of jurisdictions? Further, what might have been the pitfalls and the benefits of relaxing insider trading prohibitions in the context of the recent (and on-going) difficulties and uncertainties in financial markets?" This report has been undertaken to consider whether financial markets can ever be truly efficient, with specific relation towards insider trading and the connotations different proposals on the regulation of this activity could have on the on-going difficulties and uncertainties in the financial markets at present. To explain some of the fundamental terms this report will be discussing; A financial market is any market place that allows traders to buy and sell financial assets such as bonds, shares, commodities, currency’s and derivatives. They are typically defined by having transparent pricing, basic regulations on trading, costs and fee’s and market forces determining the prices of securities that trade. Examples of financial markets include the New York stock exchange (NYSE) and the forex markets. Insider trading defines the buying and selling of securities by someone who has access to material, non public information

  • Word count: 2072
  • Level: University Degree
  • Subject: Business and Administrative studies
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Economics Questions on National Income, Aggregate Demand and Business Cycles.

F101ECO – Assignment 2 Calum Stringer 0600532 Q1A When determining National incomes there are three methods: There is the expenditure method: This is when all the spending in the economy is totaled up using this formula: C + I + G + X - M. This represents Gross Domestic Product (GDP) at market prices, it includes: . C = Consumption. 2. I = Investment this includes: Unplanned increases in inventories or stocks and planned investment in capital. 3. G = Government spending on services and goods. 4. X = Exports that the economy receives. 5. M = Imports this must be deducted because of the spending on services and goods from external economies. The income method takes into consideration the sources of income in the economy. Transfer payments (unemployment, welfare benefits and pensions) are not included: no service or good is created for income. Income includes: . Salaries and wages. 2. Self-employed income. 3. Profits that have been split into dividends with undistributed or remunerations retained. 4. Rent that includes costs of any raw materials, any intermediate inputs and attributed rent on owner-occupied housing. 5. Interest. The output method which adds up the value added by a business’s production: . The value of the business’s output less the value of inputs 2. Instead this method totals the output of final services and

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  • Level: University Degree
  • Subject: Business and Administrative studies
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To what extent have economists provided a satisfactory theoretical and empirical explanation of the global patterns of trade?

To what extent have economists provided a satisfactory theoretical and empirical explanation of the global patterns of trade? Economists study the economical behaviour of humans so they can produce models, theories and equations that mimic patterns of conduct in order to predict how they will behave in the future. Trade has always been of interest to economists. The last decades have seen an increase in the number of economists trying to come up with explanations of global patterns of trade. This is related to the recent increase in global trade and international integration, the swelling popularity of the globalisation phenomena and the increase in the number of economists advocating free trade as the best policy to further economic development and increase living standards. These explanations of trade patterns are useful as they help countries decide who to trade with, what to trade and how to do it. Many reputed economists have attempted to capture the essence of international trade in theories but not all manage to develop a theoretical model that would hold in the real world. Back in the times when mercantilism was the main concept people had of accumulation of wealth, there was this general misconception that trading was a zero-sum game. This means that, when countries traded, one country got rich at the expense of the other one. Nations resorted to waging war between

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  • Level: University Degree
  • Subject: Business and Administrative studies
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Discuss the role of government policy in reducing unemployment and inflation

Discuss the role of government policy in reducing unemployment and inflation. In your discussion make use of the diagrammatic representation of the macroeconomy developed in lectures in Term 2. One of the main responsibilities of governments is to create a stable economic and political environment in the country. Majorly governments seek to achieve a stable rate of inflation and low level of unemployment. To accomplish this governments tend to use variety of policies and strategies according to their mission. They might choose to follow interventionist policies by controlling the market with fiscal or monetary policies or they might just let the Central Bank to allocate required changes. Central Banks are considered to be independent from the government especially in developed countries however, its likely to see governments imposing their monetary strategies under the name of Central Bank in order to avoid public pressure and criticism. Inflation can be described as a ‘persistent’ increase in the average price level in the economy. It can be measured through consumer price index (CPI). A small price change in the market doesn’t have any significant affect on the inflation rate, where only consistent price increases changes inflation level. (Blink, 2007) On the other hand, unemployment is another key factor in the economy that indicates the strength and potential of

  • Word count: 1768
  • Level: University Degree
  • Subject: Business and Administrative studies
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Business Cycles.

EC1000 - BUSINESS & THE ECONOMIC ENVIRONMENT SEMESTER 1- 2002 RISHMA DATTANI SUNDEEP SINGH CHAHAL Introduction into Business Cycles Business Cycles Business cycles are numerous changes in the level of business and economic activity over time. This business activity is measured by measures of Real Income specifically Real GDP (Gross Domestic Product). Quite often these cycles occur because spending in the economy (as measured by RGDP) differs from the ability of the economy to produce goods and services. A long-lasting period of growth in spending that exceeds the growth rate in output will lead to tight factor markets. The economy may change into a period of recession simply because the current rate of spending cannot continue. An Example of a Business Cycle: Source: www.buslink_SEARCH-BcYcles.ac.uk Business Link These cycles occur at regular intervals in a market economy as the rate of real economic growth exceeds the growth in the prospective of the economy to produce goods and services. Recessions may also occur or be long lasting as consumers and producers become more negative about future economic events. This lack of enthusiasm may lead to a decline in both consumption and investment spending resulting in an increase in record levels. A History of Business Cycles Since World War II, most business cycles would last 3-5 years peak-to-peak. The average

  • Word count: 2866
  • Level: University Degree
  • Subject: Business and Administrative studies
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Assess the extent to which UK Governments have successfully controlled inflation in recent years.

Assess the extent to which UK Governments have successfully controlled inflation in recent years The aim of the Government has always been to keep inflation low whilst maintaining low unemployment and high growth. Over recent years (roughly 1990 to 2003), there has been a dramatic change in the level of inflation, ranging from about 9.5% to 2%, a huge change in terms of inflation. As can be seen by the graph below, before 1993, the UK has suffered large levels of inflation. In the 1980s, a change in the interest rate was the primary way to influence inflation. For example if expenditure (aggregate demand) is too high, inflation is high and the government reacts by increasing interest rates. However this had a bad effect in the short run in 1988, as mortgage repayment, resulting in a higher Retail Price Index. This increase of inflation then caused wage price spiralling, and inflation grew higher then ever. In order to overcome these high inflation rates, monetary policies were used. For a brief period, the government turned to the exchange rate as a means to control inflation and in 1990, the UK entered the European Exchange Rate Mechanism (ERM). Monetary policy had to be set to ensure that the pound did not strengthen or weaken by more than a certain amount against other currencies in the system. Unfortunately differences in economic conditions across Europe forced England

  • Word count: 1231
  • Level: University Degree
  • Subject: Business and Administrative studies
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