This will help increase exports and reduce the current account deficit. For example, the government could increase spending on education and training. Vocational training schemes may help increase labour productivity because workers will have more skills. A more productive workforce can improve the competitiveness of UK exports. Alternatively, the Government could introduce a free market supply side policy such as reducing the power of trades unions.
It can be argued that quality of people’s lives depends on more things than simply the material resources that are available. Another common problem with using GDP as a way to compare is the problem with exchange rates. GDP is calculated initially in terms of local currencies and then later it is converted into US dollar using official rates. The conversion into US dollar itself is a problem since the rates used are likely to be influenced by government intervention. This is especially true in developing economies where the currencies are normally pegged to another currency such as the US dollars.
Many economists believe “that a rapid stock of the nation’s money causes inflation” (pg.169). The rate of inflation can affect borrowing power for a new business owner as, “the rate of inflation expected by the borrower and the lender will be influence by various interest rates” (pg. 169). When inflation is high, many lenders interest rate increase to compensate for the impact inflation has on their business and the decrease in purchasing power of money that has to be paid back in the future. Since, the FED set the interest rate in which the banks borrow from, Edgars’ ability to borrow enough money or establish a line of credit to start his business will be affected by inflation, interest rate and financial policies.
Assignment 3.1 Determining Causes and Effects-Draft Version Prof. Dennis Millan English 115 08-02-2014 A personal budget is one of the several important considerations which are maintained to avoid personal financial crisis. It helps in tracking the budget and understanding the level of financial stability one has. It admittedly gives out a road map for financial stability for the people who are unaware of the finances, and are prone to spending a lot of money. This paper critically analyses the cause effect relationship if one does not maintain a personal budget. This paper tries to understand how not maintaining a personal budget affects personal finances and in turn the global finances.
Assignment 3.1 Determining Causes and Effects-Draft Version Prof. Dennis Millan English 115 08-02-2014 A personal budget is one of the several important considerations which are maintained to avoid personal financial crisis. It helps in tracking the budget and understanding the level of financial stability one has. It admittedly gives out a road map for financial stability for the people who are unaware of the finances, and are prone to spending a lot of money. This paper critically analyses the cause effect relationship if one does not maintain a personal budget. This paper tries to understand how not maintaining a personal budget affects personal finances and in turn the global finances.
All monetary policy factors work together in collaboration to achieve a balance between economic growth, low inflation, and a reasonable rate of unemployment. It is important to have a good balance between the different factors influencing monetary policy because if the money supply is either too “easy” or too “tight” there are undesirable effects on the economy. If the money supply is increased to eliminate or reduce inflation, and it is not done carefully, and gradually—the economy could suffer from increased unemployment and a recession may result. If the money supply is decreased to help the economy overcome a recession, and it is not done carefully and with gradually, it can result in economic inflation. Neither one of these are desired effects, so caution and careful consideration of possible monetary policy actions is necessary each time a decision is
When the interest rates are low, more funds are available; companies expand with the increase in employment. When the interest rates are high, fewer funds are available; companies do not tend to expand with the decrease in employment. So the point is implementing policy by raising or lowering interest rates can affect the demand for goods and services. In conclusion, the main purpose of money is to buy goods and services that are available in the markets. Money has four major functions and medium of exchange is what the nation uses the most in current economy.
This is a form of banking in which banks are only required to keep a fraction of their total deposits on hand. There are two types of money in a fractional-reserve banking system, currency originally issued by the central bank, and demand deposits at commercial banks. Fractional Reserve banking allows banks to generate more funds and its main purpose is to give out loans in which helps to creates more money. By the working of the modern banking system, banks expand the money supply of a country whenever a new loan is created. The Federal Reserve also uses fractional reserve banking to create money by allowing multiple banks to practice fractional banking with inter-bank business transactions without risking bankruptcy and aide in essentially expanding the money supply of the economy.
If the money supple is low the Federal Reserve can lower the discount rate or interest rate and this will increase the money supply. This will allow the banks to lower the interest rates also allowing more consumers and businesses to borrow money. If the money supply is high then the Federal Reserve can raise the discount rates and this will lower the money supply. This will cause interest rates to go higher in banks causing fewer loans to be made to consumers and businesses. The Federal Reserve sets the discount rate with the approval of the Board of Governors.
(This is why people say the Fed prints money.) The Federal Reserve can restrict credit by raising interest rates and making credit more expensive. This reduces the money supply, which curbs inflation. Why is managing inflation so important? Ongoing inflation is like an insidious cancer that destroys any benefits of