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.
If Americans suddenly started working 35 hours instead of 40 (a 12.5 percent decrease in total hours), it would seem to suggest that there would be some sort of proportional decrease in production. This would affect the overall GDP, and lower the quality of everyone’s lives. Perhaps we would create a condition resulting in even more unemployment. On the other hand if we worked even harder, we may be able to shift the PPC to increase economic growth. This creates opportunities for business; possibly increasing the GDP, lowering unemployment and improving the quality of life for all.
Miss Lee is suggesting tax increase and government spending reduction. This will worsen the economic situation. In order to create jobs, money needs to be invested. Miss Lopez thinks the Fed should leave interest rates alone, but strongly sell bonds and raise the bank reserve requirement. The Fed selling bonds means taking
This means that Tesco will be more profitable as customers have more money to spend, they will need to employ for staff and it is better for the economy as Tesco can exports mass amount of home grown products cheaply. Cost of Borrowing Money – When the economy is stable Tesco will be able to borrow more finance if they wish to expand or move into a new country. This also would increase the potential for employment in Tesco and so will have a positive effect on the state of the economy. Tesco tend to borrow finance when the banks interest rate is lower. In recent years, the interest rate has been at an all time low.
Secondly high taxes create disincentives to work and this can be analysed through income and substitution effects. The substitute for work is leisure time and when taxes increase the opportunity cost for leisure time decreases, also people will have to work longer hours to earn the same post tax income causing disincentives as it reduces living standards as people must work longer and harder for the same incomes. This will create disincentives to work and so lead to a reduction in the labour force meaning less people in jobs and so less people paying income tax. Also as people earn less this way consumption in the economy falls therefore reducing the governments VAT recipts and corporate tax revenues and businesses make lower profits. This will lead to increases in the fiscal deficits as the government earns less and may be spending more in forms of social protection i.e.
A current account deficit means the country imports a greater value of goods and services than it exports. To reduce a current account deficit we need to either increase the value of exports and or reduce imports. Supply side policies aim to increase the productivity of the economy. If the manufacturing sector becomes more productive, the relative cost of British goods will fall and therefore they will become more competitive. This will help increase exports and reduce the current account deficit.
Economists believe that government spending should rise temporarily so the drop in private spending can repair itself. The government is taking an opposite approach to the advice of economists by issuing immediate spending cuts. This fiscal policy is inappropriate for the current economic situation. With large spending cuts, the government could push the economy back into another unwanted recession. With political campaigns for the United States Presidency heating up, Americans should not be
As situations happen around the world the internal economy is being affected, the price of oil increases and more money in the market should be created, but this will affect the inflation, as more money is in the market, the GDP keep growing and the unemployment is decreasing. To balance the economic growth, lower the inflation, and make a reasonable rate of unemployment it is important to take in consideration that typically if money is released into the system the real Gross Domestic Product will increase, creating opportunities of work and decreasing the unemployment rate. After indentifying the tools used for the Federal Reserve and analyzing the influence this has with the money supply the Feds can add or take money into the system to control the levels of inflation, increase the Gross Domestic Product and reduce the
Another, way to establish growth in the future would be to use budget deficit as a tool or demand management. In the UK and in other federal government’s borrowing is used as a way of managing the aggregate demand. Increase in borrowing can be a stimulus to demand as the other sectors are suffering from the weakness of spending. Keeping a higher level of demand will help with sustaining growth and help to keep unemployment rate
With higher GDP the govt will collect more taxes; this is because people will pay more income tax and VAT. This is beneficial because the govt can use this increased revenues to reduce the level of government borrowing and/or spend more on public services and investment in the country infrastructure. Higher economic growth will lead to an increase in demand for labour as firms will be producing more. Therefore unemployment will fall, this has various advantages such as lower govt spending on benefits and less social problems. However economic growth has various costs.