...Assignment 2: LASA 1: Inflation and Government Economic Policies Inflation is a measure of how prices have changed over time. If prices are changing due to inflation, each dollar spent will buy less. In order to answer the questions below, go to the following website: http://www.bls.gov/cpi/ Questions: What is inflation? What are the causes of inflation? Is inflation desirable and what can be done to control inflation in a market economy? What is the Consumer Price Index (CPI)? How has the CPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CPI for this period and cite your source. What is the Producer Price Index (PPI)? How has the PPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the PPI for this period and cite your source. What is the Consumer Expenditure Survey (CE)? How has the Survey behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CE for this period and cite your source. What do the measures above tell us about consumer behavior? Have incomes changed enough to offset the inflation since 2000? What can we predict about future inflation? What are the implications of these measures for government economic policies? By Wednesday, January 22, 2014, create a Microsoft Word file to collate your answers and submit it to the M3: Assignment 2 Dropbox. ...
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...Indian and Chinese policies to tackle inflation Abstract: India and china the two Asian giant, have shown economic growth in last few decades. The expansion of the economy brought high inflation in both countries. Inflation impacts all types of the consumers while rich or poor, it will become a real problem if the countries didn’t adopt policies to decrease the inflation rate. India and china have a very fast economic growth with fast population. The government and the central bank have to work beside to curb the inflation using two main policies are monetary policy and fiscal policy. In the monetary policy the central bank has to manage the many supply in the market and also control and decline the inflation, in terms of fiscal policy the government try to see the tax level to impact in the inflation rate. Monetary policy has more effect than fiscal policy, but also there are challenges implementations of the policies. Argument 1(monetary policy) India has faced a hyperinflation in years 2009 to 2011 to unprecedented level. The inflation in India affects the saving of the Indian household which decreased the value of saving in that nation. The monetary authorities are trying to impact the money supply directly without creating deformation in the economy by changes CRR (cash reserve ratio), repo and reverse repo rate. The main objective is to maintain price stability. The RBI (reserve bank of India) trying to control the money supply by using which called contractionary...
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...Fiscal and Monetary Policies essay Frank iula Mod3a 2-22-12 The Monetary and Fiscal Policies, although controlled by two different organizations, are the ways that our economy is kept under control. Both policies have their strengths and weaknesses, some situations favoring use of both policies, but most of the time, only one is necessary. Fiscal Policy can be explained in many ways, for example. Fiscal policy is the use of the government budget to affect an economy. When the government decides on the taxes that it collects, the transfer payments it gives out, or the goods and services that it purchases, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groups make tax cut for families with children, for example, raises the disposable income of such families. Discussions of fiscal policy, however, usually focus on the effect of changes in the government budget on the overall economy on such macroeconomic variables as GNP and unemployment and inflation. Fiscal Policy also can be explained as the economic term which describes the behavior of governments in raising money to fund current spending and investment for collective social purposes and for transfer payments to citizens and residents of the territory for which the government is responsible. The money may be raised by taxation, by borrowing, by user charges on social assets or services,...
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...In a free market society where firms and households shape the economy, government intervention can significantly contribute to economic stability and improve current economic outcomes. The successful use of government policy tools is evident through an examination of environmental economics, monetary policy and the labour market. With regards to the environment and the labour market, the government have made use of taxes, permit trading systems, general regulations and transfer payments to influence economic outcomes in each of these respective fields. By studying monetary policy it is also apparent that control over the interest rate mechanism is another effective tool used by policymakers to enhance the present and future economic circumstances of a nation. As society continues to expand, the quality of the environment is beginning to deteriorate. Governments to prevent this from occurring and to avoid market inefficiency, can help the economy through policy tools such as enforcing taxes and regulating pollution permit trading systems. As shown in Figure 1 below, market equilibrium (Me) on its own is inefficient because it does not take into consideration the negative externalities that arise during production and does not account for a lack of incentive by firms to incorporate additional production costs. The implications of market failure will mean that a society will not be allocative efficient and as a result output will be greater than it what it should be (Q0 instead...
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... * Evaluating how their business environment is influenced by government economic policy which may be identified through the application of economic theory. * Critically evaluating the local economic business environment measured against the choice of a comparative international economic and business system. (Pictorial techniques may be used which are appropriate to illustrate and justify the evaluation, e.g. Graphs, charts, economic curve diagrams, etc.) (700 – 1,000 words) Question 2 * Critical evaluation of measures used by governments and central banks to manage the economies of their countries. * By critically evaluating, using convincing arguments in support of the measures used to reduce, minimise or alleviate economic difficulties many countries face. (Examples should be used in the submission to illustrate the justified view) (1,100 – 1,500 words) 1. BUSINESS includes all doings linked with production, trade, banking, coverage, finance, energy, advertising, packaging etc. ENVIRONMENT refers to all external forces, which have comportment on the functioning of business. The environment includes factors outside the firm which can lead to opportunities for or threats to the firm. There is close relationship between business and its economic environment. Business obtains all its needed inputs from the economic environment and it absorbs the output of business units. ECONOMIC POLICY is the term used to describe administration actions that are intended...
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...Inflation – Impacts On The Economic Growth Of Nigeria By DoubleGist | Published: June 5, 2013 Inflation – Impacts On The Economic Growth Of Nigeria Inflation – Impacts On The Economic Growth Of Nigeria A macroeconomics problem facing Nigeria, and the most disturbing, is the problem of inflation. As a result of its growing rate, Nigerian government is concerned about its impacts on her economic growth. To place an order for the Complete Project Material, pay N5,000 to GTBank (Guaranty Trust Bank) Account Name – Chudi-Oji Chukwuka Account No – 0044157183 Then text the name of the Project topic, email address and your names to 08060565721. Many authors have written on Impacts of inflation on Nigerian economy, but the authors have different views because inflation analysis, nevertheless, one thing common is that all the authors agree that inflation has Impact on Nigerian economic growth. Samuelson (1973), defines inflation as “a general rising prices for breeds, cars, haircut, rising wages, rent etc. Onwukwe (2003), on his side defines inflation as “a significant and sustained rise in the general price level or a declining value of the monetary units. The problem created by the rising prices of goods and services has become two difficult for government to solve. During inflationary period, fixed amounts of money buy less quantity of goods and services. The real value of money is drastically reduced i.e the purchasing power of consumers are reduced. The Impact of rapid...
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...supply, total employment and output levels and fluctuations in these aggregates magnitudes. A macroeconomic stable environment can be defined as one in which inflation is low and predictable, the exchange rate is near its equilibrium level, the government budget is well managed, the budget deficit relative to GDP is at a reasonable level and the use of central bank credit to finance the budget deficit is kept at a minimal level. Macroeconomic stability sends important signals to the private sector about the direction of economic policies and the credibility of authorities’ commitment to manage the economy efficiently. Such stability, by facilitating long term planning and investment decisions, encourages savings and capital accumulation by the private sector. Macroeconomic instability takes place in two forms namely exogenous shocks and inappropriate policies. Exogenous shocks (such as reversal capital flows, terms of trade and natural disasters) require compensatory action and can rug the economy into disequilibrium. On the other hand inappropriate policies such as the monetary and fiscal policy have a direct impact on the macroeconomic stability of a country. According to (AmosWeb, 2012), governments pursue three major macroeconomics goals namely economic growth, low unemployment and low inflation rates. Economic growth can be defined as the yearly change in...
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...Conflict between Governments Macroeconomic Objectives Munene Morris Introduction The aim of this paper is to discuss conflict between government and macro-economic objectives with a special focus on UK economy. It is good to note that over the recent times, the economy of the United Kingdom has passed through extreme turbulent times and it has been facing many challenges on its recovery (Acocella and Jones 2015). The banking crisis that has been witnessed in the recent past has pointed out many economic issues which have created an intensive debate on policy amendment within the UK government. This essay therefore, considers key economic variables as important indicators in analyzing the state of UK economy and more on the influence created by macro-economic objectives and policies that can move the economy out of recession. The paper also considers what may likely to happen on the economy in the coming years and the effect posed by the present policy decisions. Finally the UK may likely to face major threats including losing a Triple A credit rating. However, despite of the present threats, it is good to consider the opportunities that can be realized from the economy that is recovering. Considering the issue of macroeconomics, the most important issue to consider is whether the markets are left alone or not, normally suggesting, in regard to the long run economic equilibrium. If at no cost the function of market has led to an inclusive service level on...
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...Q1. The Chinese Government has recently cut 2012 GDP growth forecast to 7.5%. Chinese Government forecast to lower its GDP growth rate to 7.5% from an 8% in place since 2005, a signal that leaders are determined to reduce reliance on exports and capital spending in favor of consumption. In face of global turbulence and a pressing domestic demand for economic restructuring, China forecast a slightly lower GDP growth rate to achieve "higher-level, higher-quality development over a long period of time." To achieve steady growth, the government will continue to expand domestic demand and keep foreign demand stable, vigorously develop the real economic, so as to counter instability and uncertainty at home and abroad. In my view, there are two possible reasons for Chinese Government forcast to cut 2012 GDP growth at 7.5%. The first reason is to comply with the need of international economic situation and domestic population structure change. Since China joined the WTO in 2001, China economic growth at double-digital in many years, it is benefit from rapid global economic growth provide the overseas market demand pull. However, with the outbreak of the 2008 global financial crisis and the ensuing sovereign debt crisis in the United States and Europe, the global economic growth in a black outlook, the overall recovery of economic in developed countries will be a slowly and long process. It will affected China economic. In expanding United States and Europe export market, adjustment...
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...key indicators that are used when comparing economic performance: 1. Economic Growth 2. Unemployment 3. Balance of Payments 4. Inflation Economic Growth: Economic growth is defined as 'an increase in the productive capacity of an economy'. This is shown on The Production Possibility Frontier (PPF) below: There are a number of different causes of economic growth - Improving quantity and quality of labour will cause economic growth: * A decrease in income tax encourages the unemployed to find work and increases the quantity of the work force. * Inward migration results in more skilled workers within the country and with better labour available efficiency will increase. * Technological advancements will mean that the quality and efficiency of capital used by firms will increase and therefore productivity will rise. The Economic Cycle All countries at every stage of their economic development experience periodic business cycles where the rate of growth of production (real GDP), incomes and spending fluctuates. The length and volatility of each cycle varies over time. There are booms: * Higher consumption * More houses built * Imports rise and exceeds rise in exports (deterioration) * Lower unemployment * Rise in AD * Higher tax revenue for govt There are also recessions: * Declining AD * Rising Unemployment * Falling demand for imports * Lesser chance of Inflation * Lower tax rev for govt * Increased...
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...ECONOMIC of INDONESIA “INFLATION” Created by: Gabriella Vidiananda 0810233017 Ira Ardella Putri 0810233023 Gilang Pradipta 0810233018 Accounting Department Faculty of Economic University of Brawijaya 2011 INFLATION Definition of inflation We often hear the word inflation (level of inflation) on television, in newspapers, magazines, and various other media. Inflation is one of economic symptom that has much attention from the economic expert. In many cases inflation is unbeneficial symptom and the people who has fix salary is the most harm. In principle, the definition or meaning inflation was widely noted scientists and experts in their field. With regard to the definition or meaning of inflation in according to experts, there are some following, in according to Winardi (1995: 235) definition or meaning of inflation is the period in which the purchasing power of the Monetary Union down. Inflation can occur when the amount of money or deposits in circulation is larger than the amount of goods and services. This is often supported by the loss of public confidence in the country vis-à-vis the domestic currency, which then cause symptoms that apply to exchange money to items. According to Bodie, and Marcus (2001: 331), the definition or meaning of inflation is the value at which the price level of goods and services in general has increased. According to Weston and Copeland (1998: 250), definition of inflation is the state of the economy that experienced...
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...1. Definition: Fiscal policy in economics is to use the government revenue collection and the expenditure to have an impact on economy. The policy is based on John Maynard Keynes, the British economist, who stated the increase or decrease in the aggregate demand and expenditures will influence the economic system factors. (Sullivan,A.&Steven M,S 2005,p387) The changes in tax and government expenditure are regarded as the major fiscal policy instruments. Government revenue collection (taxes) plays the role in how much government and individuals have to spend. For instance, the government could stimulate the consumers’ spending by cutting taxes. The effect of fiscal policy: The variables will influence the economy in the aggregate demand so that the policy will achieve the objectives including the price stability, the economic growth and the employment. Keynesian economics indicates that the changes efficiently stimulate the aggregate demand at the economy boom’s beginning. (Blinder 2012) It is argued that Keynesian economics model can be used to establish the framework for strong economic growth. However, economists also debate the fiscal policy effectiveness. The arguments concentrate on crowding out effect whether the interest rate increase, which may offset the spending stimulation, is led by the government borrowing. (Fiscal policy of Cliff Notes 2013) Once the government faces the deficit, the public fund will be important, the interest rate will improve. 2....
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...and Fiscal Policy? Economic policy-makers are said to have two kinds of tools to influence a country's economy: fiscal and monetary. Fiscal policy relates to government spending and revenue collection. For example, when demand is low in the economy, the government can step in and increase its spending to stimulate demand. Or it can lower taxes to increase disposable income for people as well as corporations. Monetary policy relates to the supply of money, which is controlled via factors such as interest rates and reserve requirements (CRR) for banks. For example, to control high inflation, policy-makers (usually an independent central bank) can raise interest rates thereby reducing money supply * Monetary policy involves changing the interest rate and influencing the money supply. * Fiscal policy involves the government changing tax rates and levels of government spending to influence aggregate demand in the economy. They are both used to pursue policies of higher economic growth or controlling inflation. Monetary Policy Monetary policy is usually carried out by the Central Bank / Monetary authorities and involves: * Setting base interest rates (e.g. Bank of England in UK and Federal Reserve in US) * Influencing the supply of money. E.g. Policy of quantitative easing to increase the supply of money. How Monetary Policy Works * The Central Bank may have an inflation target of 2%. If they feel inflation is going to go above the inflation target, due...
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...INDIA INFLATION SLOWS TO LOWEST LEVEL IN MORE THAN 2 YEARS Yearly prices of food decreased 0.52% in January from a 0.74% rise in December, it happen because helped by supplies of vegetables increased. Nevertheless, price of protein-rich food items stood high. Due to the food prices fallen, central bank have to cut rates in order to prevent economic slowdown. The slow inflation growth had become good news as according to Indian policymakers where they had been struggled for high prices in the past two years. In fact, the India’s economic suffer the slowest growth for the past three years. As it was expected from the Reserve Bank of India (RBI), the economy had been stimulated in which RBI begins to cut the interest rate on the first quarter of April 1st. Furthermore, in year 2012, the economists forecast that RBI would cuts the policy rate from 100 basis points up to 50 basis points for the next quarter April to June. There was a decreased in the India’s federal bond yield from 8.79 percent to 8.18 percent for the 2012 bond yield. Besides, the prices of the food had decreased up to 0.52 percent from 0.74 percent. It happens because of the increased in the supplies of vegetables. On the other hand, the prices of the protein food like fish, meat, milk, and eggs still expensive in which it was argued to become the problems. The other area like petrol prices remains constant due to the political considerations that government adjusts...
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...Without determined economic policies and strong political will, the United States may have never recovered from the many economic crises it has faced. Economic policies encompass a wide range of government measures to change the economy, and are extremely important for reversing downturns in the economy. The goals of economic policy are economic growth, stable prices, and full employment of the workforce. In general, an economic policy is successful if it reduces unemployment, reduces inflation, and encourages economic growth although these are not the only metrics. There is debate among economists over whether supply-side or demand-side are best for economic growth, coupling these with monetary policy are key for maintaining a healthy economy....
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