Our money supply affects the country’s economy, interest rates, and borrowing. Erratic increase or decrease in prices of commodities of other items, if continued unabated for a substantial period, can be a source of imbalance in the economy. Why it is important to increase economic growth? It is important to increase economic growth to keep the economy moving forward to prevent job losses, and business closures, which in return you will have, a low money supply. My rationale for the Reserve Requirements would be by lowering the reserve requirements, and the banks will be able to have more money to loan, and then increasing the money supply.
Demand side policies are those that manipulate the level of aggregate demand (AD) to achieve one or more economic objective. The policies can be fiscal policies (changes in government spending and/or taxation), or they might be monetary policies (which are largely changes in the short-term rate of interest). The four major macroeconomic objectives are a sustainable level of economic growth; low inflation; low unemployment; and a medium term balance on current account. Recently the government have used loose fiscal policy and the MPC have reduced the rate of interest. These are designed to increase the level of AD and increase in national income.
At last, achieve aggregate demand and aggregate supply to be an ideal balance. Monetary policy is divided into two types: expansionary and tightening. Aggressive monetary policy is to stimulate aggregate demand by increasing the speed of the money supply growth. In this policy, it is easier to obtain the credit, and the interest rates will reduce. Therefore, when the aggregate demand compared with the economic production capacity is quite low, expansionary monetary policy should be taken into use appropriately.
(ii) Capital structure decisions The cost of capital isalso an important consideration in capital structuredecisions. The finance manager must raise capital fromdifferent sources in a way that it optimizes the risk andcost factors. The sources of funds which have less cost involved high risk. Raising of loans may, therefore, be cheaper on account of income tax benefits, but it involves heavy risk because a slight fall in the earning capacity of the company may bring the firm near to cash insolvency. It is, therefore, absolutely necessary that cost of each source of funds is carefully considered and compared with the risk involved with it.
To what extent did Quantitative Easing improve economic growth in the UK? Central banks try to raise the amount of lending and activity in the economy indirectly, by cutting interest rates. Lower interest rates encourage people to spend, not save. But when interest rates can go no lower, a central bank's main option is to pump money into the economy directly. That process is known as Quantitative Easing (QE).
Introduction Because it is particularly hard to distinguish the causes for or elements that lead to the state of inflation, numerous theories and conceptions have been presented for same intention. All these theories attempt to elucidate the supply and demand elements that effect in the formation of the situation of inflation. In this assignment, I will discuss two theories of inflation and its economic effects and will analyze how both theories will help in raising overall national income in the era of economic recession and unemployment. 1. Keynesian Theory 2.
Lower income tax will act as a reward for unemployed workers to join the labor market, or for existing workers to work harder. Lower corporation tax furnish encourage and reward for entrepreneurs to start and so increase national output. Interventionist supply-side policies are adopting government intervention to overcome market failure. For example, increase spending on education and training to reduce occupational immobility. Better education and training to improve skills, agility, and mobility – also called human capital development.
There are country A and B. When policy maker from country A increases the price above price equilibrium, which means higher exchange rate creates the market surplus, to maintain the rates to be at the level Country A should buy up the surplus. In fact that Country A central bank should decrease money supply. As higher exchange rate could lead Country A currency more expensive (revaluation), which could decrease exports but higher Country A currency makes foreign currency relatively cheaper so people from Country A could import more foreign goods. These lead to balance of payment to be deficit due to surplus in exchange market and to maintain the rate fixed above equilibrium, outflow of payment is needed.
To use fundamental forecasting, firstly, Logan has to develop a model to determinethe economic variables and how they impact the pound’s value. Subsequently, Logan could forecast the future value of the pound by using the information along with forecasts of the economic variables. It is believed the fundamental forecast would reflect depreciation of the pound. This is because the pound depreciated when British inflation was high in the past andLogan expects British inflation to be high in the future as well. Therefore, based on the forecast of this economic variable and the relationship between inflation and the pound’s value, the pound would be expected to depreciate.