...In general the economy tends to experience different trends. These trends can be grouped as the business/trade cycle and may contain a boom, recession, depression and recovery. A business/trade cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real Gross Domestic Product (GDP) and other macroeconomic variables. Samuelson and Nordhaus (1998), defined it as ‘a swing in total national input, income and employment, usually lasting for a period of 2 to 10 years, marked by widespread expansion or contraction in most sectors of the economy’. These fluctuations in economic activity usually have implications on employment, consumption, business confidence, investment and output. The Keynesian Approach, this theory shows how the collaboration of multiplier and accelerator can lead to regular cycles in aggregate demand. The Keynesians believe that economic activity is generally unstable and is subject to inconsistent shocks, usually causing the economic fluctuations and are attributed to the changes in autonomous expenditures especially investment. The Keynesian approach is pretty simple; higher investment will lead to a larger rise in income and output in the short run. This means that consumers will spend some of their income on consumption goods. This will give rise to further increase in expenditure. Ceteris paribus an initial rise in autonomous investment produces a more than proportionate rise in income. The rise...
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...business cycles, monetary policy, fiscal policy, inflation and unemployment Macroeconomics is a broad sub-field of economics that establishes the behavior, outlook and structure, collective and established decision making system of an economy at large and usually involves national economies, regional and global economies with little or no involvement of the individual markets. Gross National Product is a determining tool in macroeconomics that measures a nation’s economy and status through international investments and residents working over-seas. GNP excludes any product values produced by foreign investors within the country. GNP is a great indicator in macroeconomics when assessing economic progress in comparison with Gross Domestic Income. (Clark & Montjoy, 2001) Macroeconomics uses GDP to determine the value of all market products and services produced within a given boundary usually a nation in a period of one year. At every stage of production, the value of all goods is added and the economic growth established based on the previously assessed standards. Macroeconomists explain that unemployment tends to reduce with a rising GDP rate since the output is increased and thus need for more skilled and unskilled labor force. Inflation gives an explanation on the rate at which product prices increase over time. Macroeconomists study this phenomenon through The Consumer Price Index that gives a timely price for particular products. (Blanchard, 2006) Monetary policy allows for...
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...Expansionary Fiscal and Monetary Policies Macroeconomics: ECO 203 Professor Charles Aki September 1, 2013 The US economy has seen some detrimental changes over the past decade. These changes resulted in unsubstantial unemployment rates, fluctuating interest rates, unstable GDP, and an increase in taxes. The federal government has an obligation to citizens to respond to the changes in the economy that affect each household. Expansionary Fiscal and Monetary Policies are economic policies used by the government to level out the extreme swings in our economy. The development state of US economy has forced the Federal Government to implement changes using their authority in Expansionary Fiscal and Monetary Policies in order to stabilize the economy. President Bush and President Obama Administrations created and implemented a stimulus package in direct response to the 2008 economic crisis. Government expansion is necessary for economic growth. The government should provide a stable environment for economic growth and maintain the stability of currency, enforce and defend property rights and provide the assurance that private citizens and market place transactions are accountable. This is how resources are cycled into our economy. (Amacher;Pate, 2012) Without government spending, the government would not be able to carry out its duties to the US citizens. Government borrowing and spending stimulates the economy and is risky because it cannot be implemented at any time because...
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...Bangladesh began implementing structural policy reforms to increase the market orientation of its economy in the late 1970s. The authorities adopted significant reforms in agriculture, industry, and trade, and also pursued reforms in the financial and infrastructure sectors. These reforms helped accelerate growth from an annual average of 3 percent in the 1970s to 4 percent in the 1980s and to 5 percent in the 1990s. Sound and sustained macroeconomic management ensured macroeconomic stability, contributing to Bangladesh’s ability to maintain one of the lowest growth volatilities in the world. Major Policy Reforms Contributed to Growth Acceleration: * Agricultural policy * Industrial policy * Trade policy * Infrastructure policy * Financial policy * Macroeconomic policies * Human Development policies Macroeconomic policies Following the initial debacle of the 1972–75 periods, Bangladesh was able to maintain a broad degree of stability of macroeconomic policies, as reflected in relatively low inflation and a stable real exchange rate. Fiscal, monetary and exchange rate management was broadly on track for most of the period until around the end of the 1990s. This long-term good macroeconomic management served Bangladesh well, contributing to incentives for private investment and exports. Inflation has now been reduced to 3–4 percent annually (Chart 7). The correction of the macroeconomic imbalances started in the late 1970s and continued...
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...the Economic Environment - Edexcel https://www.edexcel.com/.../Unit%2038%20Business%20and%20the%20... P4 explain how both fiscal and monetary policy decisions have affected a selected business. [IE]. M2 analyse the effects of fiscal and monetary policies for a. [DOC]Unit_39, Anon - VOCBUS https://vocbus.files.wordpress.com/2010/06/natunit39assignmentanon.doc Describe the effect on a selected business of variations in economic activity ... Outline how both fiscal and monetary policy decisions have affected a selected. [PDF]Unit 38: Business and the Economic Environment fc.nbvlc.org.uk/.../Unit%2038%20Business%20and%20the%20Economi... P4 explain how both fiscal and monetary policy decisions have affected a selected business. [IE]. M2 analyse the effects of fiscal and monetary policies for a. [DOC]GNVQ Part One ICT - BTEC Business btecbusiness.weebly.com/uploads/6/8/7/.../business_unit_38_btec_d.doc Analyse the implications of government policies for a selected business. D1 ... Explain how both fiscal and monetary policy decisions have affected a selected ... Explain how fiscal and monetary policy decisions have ... https://www.stuvia.com/.../explain-how-fiscal-and-monetary-policy-decis... 26 May 2014 - Explain how fiscal and monetary policy decisions have affected a selected business. Stuvia · United Kingdom · Ealing, Hammersmith and West ... How Fiscal Policy and Monetary Policy Affect the Economy ... education-portal.com/.../how-fiscal-policy-and-monetary-policy-affect-t...
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...in Canada responsible for conducting fiscal and monetary policy, name the Department of Finance and the Bank of Canada. What are the roles of each and what are each responsible for obtaining? What are the responsibilities of each institution and what tools do they have at their disposable to impact the economy? Can you say that their objections are in tandem with one another or due they sometimes conflict? Please explain. tools available to the Federal government in managing the economy -- Fiscal and Monetary Policy Legislative Overview In Canada, the monetary policy is conducted by the Bank of Canada in which the government owned organization function with considerable independence from the federal government but is accountable to the parliament. Monetary policy in Canada is set by non-elected officials at Bank of Canada. Other decisions regarding the level of government revenue and expense is part of fiscal policy which is made by the Government of Canada with the approval of the parliament of Canada, as result monetary and fiscal policies are governed independent of each other (Frigon, 2010). The role of monetary policy is to preserve the value of capital by keeping inflation low, stable and foreseeable. This allows Canada to make spending and investment decisions with confidence, encourages long-term investment in Canada and contributes to better job openings and greater productivity with a better standard of living. Monetary policy in Canada has three characteristics:...
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...An open economy is a market economy that is free from trade barriers and restrictions. There is no control over movements of labor and capital. Furthermore exports and imports form a large portion of the Gross domestic product. In an open economy some output is sold domestically while some is exported to be sold abroad. Expenditure on an open economy’s output Y is usually composed of four components: consumption of domestic goods and services, investment in domestic goods and services, government purchases of domestic goods and services, exports of domestic goods and services. An open economy macroeconomics is about fluctuations in aggregate economic activity, employment and inflation and about monetary and fiscal policies. Emphasis is on how a country’s relations to the rest of the world influence the fluctuations and forms the scope for economic policies. The national income accounts in an open economy is as follows Y= C+I+G+NX ; where C= consumption I= investment G= government purchases NX= net exports (exports-imports) CAPITAL FLOWS AND TRADE BALANCE Begin with the identity Y = C + I + G + NX. Subtract C and G from both sides to obtain Y − C − G = I + NX. Y − C − G is national saving S, which equals the sum of private saving, Y − T − C, and public saving, T − G, where T stands for taxes. Therefore, S = I + NX. Subtracting I from both sides of the equation, we can write the...
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...Eco550 Week 3 Chapter 5 1. The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned ride snowmobiles. The model specifies that the S vary jointly with disposable personal income Y and the population between ages 15 and 40,Z, and inversely with the price of the snowmobiles P. Based on the past data, the best estimate of this relationship is S= K *YZ/P where k has been estimated (with the pst data) to equal 100. If Y=$11,000, Z= $1,200, and P=$20,000 a) what value would you predict for S? Answer: The given function is S=K*YZ/P at the given values of; k=100 Y=$11,000 Z=$1,200 P=$20,000 the value of S is: S=100(11000*1200)/20000= $66,000 so there would be a sales of $66,000 at above given values. 5. A firm experienced the demand shown in the following table. a. Fill in the table by preparing forecasts based on a five-year moving average, a three-year moving average, and exponential smoothing (with a w = 0.9 and a w = 0.3). The exponential smoothing forecasts may be begun by assuming Ŷt+1 = Yt. b. Using the forecasts from 2005 through 2009, compare the accuracy of each of the forecasting methods based on the RMSE criterion. c. Which forecast would you have used for 2010? Why? 5- year 3-Year Exponential Exponential Actual Moving Moving Smoothing Smoothing Year Demand Average Acverage (W= 0.9 ) (W= 0.3 ) 2000 800 xxxx xxxx xxxx Xxxx 2001 925 xxxx xxxx 687.5 762.5 2002 900 xxxx Xxxx...
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...To identify the fiscal and monetary policy tools used by Mexican Presidents since Miguel Aleman and Make clear the fiscal and monetary indicators that define each policy the economic models of that time must be examined; from Miguel Aleman to Felipe Calderon there has been just 3 Economic Models: a) 1940-1964: Import substitution model. (Modelo de sustitución de importaciones) b) 1964-1982: Stabilizing development model. (Modelo de desarrollo estabilizador) c) 1982- ………: Neoliberal model. (Modelo neoliberal) in order to understand this models and its implications it’s important to make sure a clear understanding about the policies. The Macroeconomic policy affects a country or region as a whole. It deals with the monetary, fiscal, trade and exchange regime, as well as economic growth, inflation and national rates of employment and unemployment. Changes in demand and aggregate supply can cause short-term fluctuations in output and employment. The monetary and fiscal policy can shift aggregate demand and, therefore, influence these fluctuations. a) 1940-1964: Import substitution model, presidents on it: Manuel Ávila Camacho, Miguel Alemán Valdez, and Adolfo Ruiz Cortines. In the import substitution model, the management of public finances, which sought to redistribute income and promote domestic production, contributed to the process of industrialization and modernization in Latin America. Fiscal functions got away from their initial orientation because there...
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...for three straight years, the first time this has occurred since before World War II. Measured as a share of the economy, revenues in 2004 were at their lowest level since 1959. Given this historically low starting point, it is not surprising that revenues have recovered since then. Supporters of the tax cuts selectively cite revenue growth over just the past three years to argue that the tax cuts fueled increases in revenues. The 2001 and 2003 tax cuts were not a good idea because it added about $1.7 trillion to deficits between 2001 and 2008 and because they were financed by borrowing which increases the national debt. In an effort to bolster economic performance, President George W. Bush signed the Economic Stimulus Act of 2008 on February 13, 2008. More than two thirds of the $152 billion bill consisted of economic stimulus payments that were sent beginning in May 2008 to approximately 130 million households. As part of the ten-year tax cut bill passed by Congress in the spring of 2001, the Treasury mailed tax rebate checks of up to $300 for single individuals and up to $600 for households from late July and through late September 2001.Of those households receiving the rebate, almost 20% had reported that they would spend it and almost 32 % had reported that they would save the rebate, and 48% had reported that they would pay debt with the rebate. Concerning the impact of the rebates, the conventional wisdom is that the tax rebate signed by President Bush failed...
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...NBER WORKING PAPER SERIES CAN INFLATION TARGETING WORK IN EMERGING MARKET COUNTRIES? Frederic S. Mishkin Working Paper 10646 http://www.nber.org/papers/w10646 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 July 2004 For presentation in a conference in honor of Guillermo Calvo, held on April 15 and 16, 2004 at the International Monetary Fund in Washington, DC. The views expressed in this paper are exclusively those of the author and not those of Columbia University or the National Bureau of Economic Research.The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research. ©2004 by Frederic S. Mishkin. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Can Inflation Targeting Work in Emerging Market Countries? Frederic S. Mishkin NBER Working Paper No. 10646 July 2004 JEL No. E5, F3 ABSTRACT This paper explores issues in emerging market countries to make inflation targeting work for them. It starts by outlining why emerging market economies are so different from advanced economies and then discuss why developing strong fiscal, financial and monetary institutions is so critical to the success of inflation targeting in emerging market countries. Then it discusses two emerging market countries which illustrate what it takes to make inflation targeting...
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...manage the currencies, why are the countries governments want to manage the currency and how far they are succeeded in managing the currencies along with the importance of policy coordination, Institutions that helped to formulate the coordination internationally along with the benefits and negatives of policy coordination. Here this video is supported by two cases such as Strict fiscal and monetary policies of US in 1985 and the other is UK joining in European monetary system [1] Managed currency The majority of major world currencies are managed at least to some degree. This is due to the purchase and sale of these currencies by the central banks of different countries. They do this in order to stabilize the international money markets and affects their own monetary policies. Why managing currencies? a. Reduce currency fluctuations If the value of currencies fluctuate significantly this can cause problems for firms engaged in trade. * For example if a firm is exporting to the US, a rapid appreciation in sterling would make its exports uncompetitive and therefore may go out of business. * If a firm relied on imported raw materials a devaluation would increase the costs of imports and would reduce profitability. b. Stability encourages investment. The uncertainty of exchange rate fluctuations can reduce the incentive for firms to invest in export capacity. Some Japanese firms have said that the UK’s reluctance to join the Euro and provide a stable exchange rates...
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...The U.S. Economy Today Content Introduction…………………………………………………………………………Page 2 Data Trends………………………………………………………………………….Page 2 Fiscal & Monetary Policies….…..…………………………………….…………………………………Page 2 &3 Conclusion…………………………………………………………………………..Page 3 References…………………………………………………………………………..Page 3 Introduction We will take a look at today’s economy in the 2014. Discuss current trends such unemployment, inflation and the GDP. How do fluctuations in these trends affect the U.S. economy? What fiscal & monetary policies should be used to assist or improve our current economic situation? Lastly, what phase is our economy in today a depression, recession or expansion phase? Data Trends According to the Bureau of Labor Statistics (BLS) our current unemployment rate as of September 2014 is 5.9%, which is showing a slow steady decrease over this last year. The current GDP is 4.6%, which is showing a increase from the first quarter that was at -2.1%. The current inflation rate is at 1.7%, which has fluctuated from 1.6% in January, then had an increase in June up to 2.1%. All these factors play a role in the economical well being. For Example if the unemployment rate continues to decline and the economy reaches full employment. This will promote consumers to purchase more goods and services, because their disposable income will increase. The aggregate supply and demand will both increase, which in turn will increase the GDP. Unemployment or employment...
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...Land Subdivision Keller Graduate School of Management ECON 545: Macroeconomics Table of Content Executive Summary …………………………………………………………..pg. 3 Introduction……………………………………………………………………pg.3-4 Business Cycle………………………………………………………………... pg.4-5 a. GDP Growth Rate……………………………………………..pg.5-6 b. Inflation………………………………….………………..…..pg.6 c. Unemployment………………………………………………..pg.7 Fiscal Policy and Level of Unemployment……………………………………pg.7-9 Monetary Policy and Interest Rates…..………………………………………..pg.10 d. International Trade…………………………………………….pg.11 I. U.S. International Trade Graph………………………..pg.11 e. Demographics…………………………………………………pg.12 Analysis………………………………………………………………………..pg.13 Recommendations and Economic Justification…………....…………………..pg.13 References……………………………………………………………………..pg.14 Executive Summary After more than 30 years of growing corn, Uncle Dan wishes to leave that market and transition over to what he considers a profitable market. He has 100-acre corn farm which he was thinking of subdividing and utilizing to build shops and homes on. Uncle Dan believes that by building these shops and homes on a large piece of land he can make a greater profit renting or selling them. Subdividing land is a long process in itself and can actually be a big investment also gaining equity. When splitting the land into smaller parcels it can create a multitude of lots however prior to this an estimate needs to be...
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...On The Role of Monetary Policy: Bangladesh Perspective * Introduction 3 * Impotance of Monetary Rule 3 * Objectives of Monetary Policy 5 * Functions of Monetary Policy 5 * Economic Growth 6 * Bangladesh Monetary Policy 7 * Note Issuing Processes 7 * The Broad Discussion of Monetary Policy Objective 9 * Strategy of Monetary Policy 11 * Conclusion 13 INTRODUCTION: Monetary Policythe policy adopted by the central bank for control of the supply of money as an instrument for achieving the objectives of general economic policy. With the shifts of the policy stance of the government in various phases, necessary adjustments were made in the country's monetary policy. The Department of Research in the Bangladesh Bank plays an important role in the formulation of economic policies of the country. The principal function of the Department is to help the bank in the formulation of monetary and credit policies and also to assist it in discharging its duty as adviser to the Government on economic and financial matters. To this end, the department keeps the top executives of the bank fully informed of latest economic development both at home and abroad, in a regular and systematic manner. For this purpose the Department keeps a close watch on trends in the domestic economy as well as on international economic developments with particular reference to monetary, fiscal and trade problems...
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