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Essay / Research Paper Abstract
This 5 page paper considers a scenario where the DP is growing at 1.5%, the inflation rate is between 1% and 2% and unemployment is increasing. The different options for stimulating the economy are considered along with the potential polices side effects. Measures considered include the reduction of interest rates, the reduction of tax rates or the increased spending of government funds.
Page Count:
5 pages (~225 words per page)
File: TS14_TEecomge.rtf
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Unformatted sample text from the term paper:
inflation rate between 1% and 2%. This means in some years there may be real growth, that us growth above inflation, but in other years this may be a real
decrease. Unemployment is increasing and there is an ongoing defiant. Here there are some measures that may be seen as advisable, but there will also be some side effects that
will require a trade off. With limited GDP growth, and growing unemployment as well as inflation that is above the GDP growth there is a poor condition and there is
the need to stimulate the economy. There are two way that this can be done. The most traditional way to stimulate an economy in the short term is to decrease
the base rate of the central bank. This may not occur as most central banks are independent, although they are bound to carry out the actions to meet the government
economic targets. There are several reactions that are likely to be seen when an interest rate is lowered. Where there are lower interest rates there will be an increase
in the aggregate demand as such this will stimulate increased supply which will create jobs in the way that supply is increased.
In effect this gives the average business or family more money that they can spend (disposable income) as they are paying less on debts. This may also encourage borrowing as
the cost of debt becomes cheaper and as such, especially for businesses, this may be an attractive opportunity. The idea is that the increased income will have a multiplier effect,
increasing demand and stimulating the economy as it moves around. This will then influence the purchase decisions in the internal markets as
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