StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Inflation and Unemployment - Assignment Example

Comments (0)
Summary
The paper " Inflation and Unemployment" presents that monitory policy is a tool for the federal bank to control unemployment and inflation. But before going into the details of how monitory policy can be used for the two objectives, we will discuss some key terms…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.2% of users find it useful
Inflation and Unemployment
Read TextPreview

Extract of sample "Inflation and Unemployment"

Download file to see previous pages Reserves of commercial banks are one from of liabilities of federal bank .the imposition of reserve requirement from federal bank results this liability. Treasury deposits are also a liability for the federal banks since there are deposits made by treasury department of states. Federal Reserve notes are the notes circulated by federal banks in the country in the form of paper money. They are the claims against the assets of the federal bank and hence become a liability for the federal bank.
Since we know that one of the core functions of a federal bank is the creation and control of money in the economy, the monetary policy acts as an action plan for this purpose. The federal bank has three core tools to control the money supply in the market
Since bonds are floated in the market by the government and other organizations to raise money, they can be used by the federal bank to increase or decrease the money supply. The federal bank can either buy or sell bonds with commercial banks or the general public. Buying securities from commercial banks the reserve of commercial bank are increased while the assets base of federal bank increases. The same thing happens when the federal bank buys securities from the public, the asset base of the federal bank increases as well as that of commercial banks. Overall the money at the disposal of federal bank increases which increases the money supply n the market.
The Reserve ratio is the amount of reserve of a commercial bank that they are required to keep with the federal bank. This reserve is not allowed to be loaned to the public. A federal bank, when want to increase the money supply in the market decreases the reserve ratio which in turn decreases the reserve of commercial banks kept with the federal banks. With the increased money at the disposal of the commercial bank, they are able to load out more money in the market which increases the money supply.  ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Inflation and Unemployment

Keynesian Theory of Inflation and Unemployment

...?KEYNESIAN THEORY OF INFLATION AND UNEMPLOYMENT By Number: Introduction According to the Keynesian theory, unemployment is mainly attributed to lack of sufficient aggregate demand for services and goods in a given economy since both creates opportunities for everyone interested in working. When demand for various commodities and services decline, the production of both the demand and services consequently declines, resulting in a decreasing demand for workers, and mass unemployment in the long run. Any economy experiencing unemployment is marked by the situation where the total number of jobless individuals surpasses the number of available vacancies, such that even if all the available positions were to be filled, many citizens would...
5 Pages(1250 words)Essay

Macroeconomics Inflation and Unemployment Exchange Rate and Open Economy

...Inflation and Unemployment... Inflation and Unemployment... College: 15-14 The standards of living in a country are measured by National income accounts but there are some limitations. National income data has been used to compare how well off different countries is in comparison to others. This is in terms of the quality of life led by the citizens. Some critics however have found that the use of national income data is not 100 percent reliable indicator of standard of life (Miller, 2011). The business cycles in an economy would influence standard of living. The national output per head is assumed to represent the standard of living. The total national output is divided by the number of people in a nation. An increase in the national income per...
3 Pages(750 words)Term Paper

Why Do Market Economies Need Government United Kingdoms Economic growth, Inflation and Unemployment

...? Question Why do market economies need Government? Illustrate graphically and comment critically upon the trends in the United Kingdom’s Economic growth, Inflation and Unemployment over the past (approximately) ten years. Need of Government for Market Economies Market economies need governments for a number of key reasons: i) Governments can keep track on formation of monopolistic or oligopolistic powers in a market economy. Monopolistic and oligopolistic structures can form within a market economy and lead to dominance of some suppliers in their respective markets. Such situations create disadvantages of buyers and reduce buyer surplus for those particular markets. For this reason, free market economy can potentially impinge...
10 Pages(2500 words)Essay

Measurements of Unemployment and Inflation

...Inflation and Unemployment... Inflation and Unemployment... Measurements of Unemployment and Inflation The measurement of unemployment rate is quite significant within the context of effective management strategies development. This is so because of the major effect that unemployment rate can cause in relation to business activities. It has been noticed that when the prevailing rates of unemployment are high in the economy, the wage rates are comparatively low (Ahuja, 2008). It is quiet essential for the organizations, especially for those which are operating in a perfectly competitive market, to carry out timely measurements of the unemployment rates in order to take effective management decisions. This is so because when a firm is working in a ...
6 Pages(1500 words)Essay

Inflation, Unemployment and Growth

...Inflation and Unemployment... Inflation and Unemployment... Inflation, Unemployment and Growth Inflation A rise in the prices of products and services over time in an economyis inflation. The worst scenario brought on by inflation is that it discourages investments and savings. Shortage of goods is another problem brought on by hoarding. However, it encourages investment in non-monetary assets. 2. The CPI measures, or estimates the rate of inflation. It is measured by calculating the price of selected goods purchased over time, against 100%. One advantage of using the CPI is the modification of measures it takes into consideration. They modify their measures with current times and situations to best find the best result. One disadvantage is the di...
2 Pages(500 words)Essay

Is there an inverse relationship between inflation and unemployment ( Phillips Curve). Do unemployment rates give a realistic picture of differences in economic activity in Britain and Europe

...There is an inverse relationship between inflation and unemployment and this relationship is represented by the Philips curve. The Phillips curve shows this inverse relationship and concludes that a decrease in unemployment in an economy will correlate with increased inflation rates. According to this relationship when there are more people employed in an economy the output increases, so do the wages from the labor force. The increase in wages means that people have more money to spend which increases their demand for goods and services and ultimately the prices of these goods and services will increase to meet the increased supply of money in the economy. From the Philips curve therefore it is apparent that inflation and unemployment...
1 Pages(250 words)Essay

Unemployment and Inflation

...Inflation and Unemployment... Inflation and Unemployment... AND INFLATION UNEMPLOYMENT AND INFLATION Introduction Unemployment is the redundancy of the populations who are ready to work but cannot find jobs. Usually it is measured by expressing those who can work against the total work force in the economy (Gordon, & Solow, 2004). It can be caused by technology levels, lay off by organizations and when an economy is in a depression. It reduces the purchasing power of individuals hence reducing demand that negatively affects the economy. Inflation is the persistent rise in commodity prices in the economy. It is caused when demand exceeds supply (Lindauer, 2013), when cost of productions are high that leads to high prices. During inflation the gover...
2 Pages(500 words)Essay

Analysis on the evolution of inflation and unemployment rates

...Analysis on the Evolution of Inflation and Unemployment Rates Inflation and unemployment have an inverse relationship. This relationship was first analyzed by A.W Phillips in 1958. Phillips curve demonstrate this trade-off between inflation and unemployment rates. In an economy with low unemployment rate, wage rates increases for the workers. This increase in wages results in firms passing forward the cost to the consumer goods. The high prices for goods and services results in inflationary buildups and vice versa. Inflation rates in Qatar have been fairly average from 2005 to early 2014. According to the World Bank statistics on inflation rates in Qatar, since 2005 to 2014 inflation rates averaged about 3.73%. The highest inflation rate...
1 Pages(250 words)Essay

Unemployment and Inflation

...Inflation and Unemployment... Inflation and Unemployment... and Inflation Insert Insert The meaning of a full employment Full employment is the level of employment whereby there is an increase in demand and all who are willing to have the chance to do so. All workers have the job and can work as many hours as they can and receive the wages according to their productivity. When the economy is at full employment, the unemployment rate is not at zero. This is because full employment means everybody has a job hence the employment rate is 100%. Full employment is often considered an ideal type of work. A country that is in full employment has a lower risk of inflation hence their economy is not at risk of falling. Unemployment insurance pays the...
3 Pages(750 words)Essay

Aspects of Economic Growth, Unemployment and Inflation

...Inflation and Unemployment... Inflation and Unemployment... the of macroeconomic indicators, Economic Growth, Unemployment and Inflation are arguably the most important in the sense that given information on these aspects, it is possible to generate a quite clear snapshot of the economy that facilitates inter-temporal as well as cross country comparisons regarding the performance of the economy in question. As this essay will show, this holds true due to the nature of the relationship between the variables that determine the state of these macroeconomic indicators. The present essay will attempt to analyze, compare and contrast these concepts to illustrate the way in which the interactions in the determinant variables are reflected through them...
8 Pages(2000 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Assignment on topic Inflation and Unemployment for FREE!

Contact Us