Macroeconomics II Essay Example | Topics and Well Written Essays - 1500 words

Macroeconomics II - Essay ExampleMacroeconomics is the life-sized picture of a country. The rate of inflation measured by the Consumer price index, Growth measured by the GDP rate, and the rate of unemployment, which denotes the countrys full employment potential. On the opposite hand, Microeconomics is study of the demeanour of firms workers, markets and households. The primary goal of the government and the Bank of England is to keep inflation and unemployment as low-pitched as realizable in the process of maximizing growth. To achieve this goal a monetary and fiscal indemnity is formulated. A monetary policy is the altering of lending rates to banks this in turn releases or curbs money allow in the financial market. An increase in the prime lending rate by the Bank of England to other banks pushes them to raise the interest paid on deposits to consumers and the interest on loan to borrowers. A fiscal policy is the change in the taxation structure and public spending. Public spending in other actors line is the government spending on defense, infrastructure and welfare schemes for the country. (SourceMathew Bishop Economist Essentials of Economics, Macroeconomic policy.)Inflation is caused when demand for goods and function exceed supply or a rise in the price of oil, which most countries around the testicle are facing right now. An increase in the prime lending rate will throw out saving, and discourage borrowing due to the high rate of interest on loans and in turn engender down consumption spending by giving the common person, degrade disposable income, Therefore lower demand and this controls price rise. Now the reduction in consumption spending decreases the demand for goods and services, and businesses will bite cost as they worry about inventory pile up and future sales. This results in low wages and unemployment. So what do we do? What we see here is ironical. In the attempts to