The Meaning of Inflation Essay examples - 1084 Words

The Meaning of Inflation There are four macroeconomic policy objectives that a government pursues: high and stable economic growth, low unemployment, low inflation, the avoidance of balance of payments deficits and excessive exchange rate fluctuations. Some of these policy objectives may conflict with each other depending on the priorities of the government. A policy designed to accelerate the rate of economic growth may result in a higher rate of inflation and balance of payment deficit. Throughout the fifties and sixties, rates of inflation were generally low in the advanced industrialised economies. In the early seventies, inflation rose dramatically. By the end of the decade, many†¦show more content†¦A demand-side policy contains two types; Fiscal policy involves altering government expenditure and taxation, and Monetary policy involves altering the supply of money in the economy or manipulating the rate of interest. Fiscal policy can reduce aggregate demand by cutting government expenditure or by raising taxes which results in reducing customer expenditure. Monetary policy can reduce aggregate demand by reducing the money supply, thereby making less money available for spending or by putting up interest rates and thus making borrowing more expensive. Supply-side policies aim is to reduce the rate of increase in costs. This will help reduce leftward shifts in the aggregate supply curve. This can be done either by restraining monopoly influences on prices and incomes or by designing policies to increase productivity. Section 2: International Economics Should the UK join the single currency? Write an essay outlining the arguments for and against entry. This argument will probably be the most important economic and political decision Britain will have to make in the first half of the twenty-first century. It could lead to greater prosperity, lower inflation, more jobs and greater national influence. On the otherShow MoreRelatedGrade Inflation Has Changed The Meaning Of Good Grades2470 Words   |  10 PagesGrade inflation has changed the meaning of â€Å"good grades† in college over the years. Faculty have gradually allowed a trend to occur where a majority of students are being awarded high marks for work that is less in quality than in the past. The prestige of earning a degree is diminishing. Future employers are not sure of the skills of the people they are hiring out of college. Students are choosing less rigorous degrees to take the easy way out. Grade inflation has caused a decline in educationRead MoreEvaluate Two Macroeconomic Objectives the Government in Your Home Country Aims to Achieve and How Effective Is th e Government in Achieving Them?1286 Words   |  6 PagesUS on the UK economy. Macroeconomics, policies that aim to improve economic growth, maximise national income and raise the standard of living for citizens, have four main methods: full employment, inflation, balance of payments, equilibrium of supply and demand. In this essay I will look at: inflation and taxation. I will describe the policies followed, how they were put into practise and whether they have been effective at stabilising the British economy in this time of significant internationalRead MoreCentral Bank : Monetary Policy1178 Words   |  5 Pagesusually of a low-inflation country. But this approach meant that the country’s monetary policy was tied to the country to which it pegged, restraining the central bank’s ability to adapt their policy to shocks such supply shocks or changes in the real interest rate. Consequently, many central banks began to adopt flexible exchange rates, forcing them to find a new strategy for the conduct of monetary policy. Many countries then began targeting the growth of money supply to control inflation. EventuallyRead MoreTrade Off Between Inflation And Other Macroeconomic Aims1595 Words   |  7 PagesTrade Off Between Inflation And Other Macroeconomic Aims Keeping inflation as low as possible can be undesirable especially when we consider the short run trade-off between inflation and other macroeconomic factors such as output and employment. This can be seen from the AD-AS curve drawn below. Assume that the country is initially at and is the natural level of output in Figure 4. In order to move to a higher level of output, reduce the output gap and unemployment, inflation is inevitable asRead MoreThe Phillips Curve : The Epitome Of Antiquity Essay1384 Words   |  6 PagesThe Epitome of Antiquity Abstract In this paper, we will present a model discussed at length in Todorova (2012) representing the Phillips curve, the textbook macroeconomic relationship posting a negative relationship between unemployment and inflation. Specifically, the model posits that when unemployed workers are scarce, employers must compete with one another for the remaining, qualified workers by bidding wages upward, which translates into higher costs, which combined with stronger consumptionRead MoreInflation and Government Economic Policies1147 Words   |  5 Pages| Inflation and Government Economic Policies | M3:A2 | 5/1/2013 | | ECO 201 M3:A2 5/1/13 1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?). What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian and monetarist theories, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. With demand-pull, inflation is caused by aggregate demand beingRead MoreA New Up And Coming Uk Government1674 Words   |  7 Pagesserious debt problems, the rise in unemployment and the lengthy period of recession. To do this the brief will explain the proposed economic objectives and policies, furthermore, it will address the problems of unemployment and the effects of both inflation and international trade on the economy and business organisations. The UK economy has been going through some unsettling times in recent years and has many challenges to overcome. Our economic objective is to fulfil one goal, which is to maintainRead MoreInflation Is The Rate Of Increase For Goods And Services1516 Words   |  7 PagesInflation is the rate of increase in prices for goods and services. A rise in inflation decreases the purchasing power of money, meaning consumers would have to pay more for a product than they would have had to a year earlier. It is widely accepted that there are two types of inflation, demand-pull inflation and cost-push inflation. Demand-pull inflation is triggered by demand surpassing the economy’s ability to produce those goods and services required to satisfy demand. Cost-push inflation occursRead MoreThe Foreign Exchange Market Of Brazil919 Words   |  4 Pagesproductivity and a high unemployment rate, along with the rate of inflation increasing on a daily basis. These fluctuations effect the supply an d demand throughout the economy. In the foreign market the demand for currencies effects the supply of imports and exports. This play a major part of Brazil’s economy because they currency has depreciated to an all-time low resulting in high inflation and a large deficit. As of January 2016 Brazil’s inflation rate was reported at 10.71% and is steady rising due toRead MoreDifference Between Real Gdp And Nominal Gdp1395 Words   |  6 Pagesmeasure) of economic output that has been adjusted for a change in price. The meaning for this adjustment is that inflation or deflation has been factored in the computation of real GDP. It is the aspect of adjustment for price changes that makes a transformation of the money value to become a nominal value (Tucker 230). Nominal GDP refers to the value of Gross Domestic Product that has not factored in the adjustment for inflation. Nominal GDP is also called chained dollar GDP or current dollar GDP. There