The monetary policy was made by central banks to achieve many macroeconomic goals such as controlling inflation, consumption, etc. It manages the supply and demand for money by using the interest rate as a tool. It is used by the central bank of a country to achieve macroeconomic goals. Monetary authorities work on them to control the payable interest rate. Central banks used the key concepts of monetary policy to expand the economy such as they reduce the discount rate, decrease the reserve ratio, and purchase government security. Main objective of Monetary Policy The main objective of this policy is to attain the stability of prices. The goal is achieved when the domestic economy has the lowest possible and sustainable prices. GDP
Macroeconomics
Fiscal Policy
What is Fiscal Policy? The usage of Government expenditures and taxation to control the economy is fiscal policy. In an attempt to pursue the strategic objectives of stable prices, economic growth, and infrastructure prosperity, fiscal policy is used to control the level of domestic final demand in the economy. There are two major factors of Government when it comes to fiscal policy. 1. Alter the amount and organization of taxation and/or amendment the rate of taxation 2. Changing the quantity of investments in various financial sectors. To control budget and tax levels and economy of the Government, it uses the mechanism of fiscal policy. It is a sister monetary policy tactic through which a federal reserve impacts the amount of money in circulation. Governments can
Unemployment and Inflation – The Philip Curve
The relationship between unemployment and inflation, which is known as Philip Curve, has its critical value in the macroeconomic policies of the country. In this article we are going to discuss this relationship in detail. Mathematical Derivation The typical Phillips curve tale begins with a wage Phillips curve, as Phillips himself explains it. The rate of increase in money wages is represented (gW). Operator g here and below is the "the percentage rate of growth of" of the following vector. gW=gWT-f(U) This narrative was updated during the 1970s when employees struggled to keep up with inflation (as late Abba Lerner indicated in the 1940s). The equation has modified since the 1970s to incorporate the function of inflationary expectations (or the expected inflation rate,
What is Macroeconomics?
The questions asked by the students that what is macroeconomics? so the macroeconomic is defined as one of the major branches of economics which focuses on the aggregate behavior of the economy. In simple words, it presents the birds-eye view of the economy. It gives more focus to major or aggregate issues of time economy like growth rate, gross domestic product, gross national product, inflation, and unemployment, etc. Macroeconomic deals with the behavior, structure, decision making, and performance of the whole economy. For example, using government spending, money supply, taxes, and interest rate regulate economic stability and growth. The global, national, and regional economies are also its subject. Microeconomics and macroeconomics are two major and are general fields of economics. The United
Defining Consumer Surplus
Consumer Surplus Definition The consumer surplus is the economic welfare that consumer gets by consuming the products. The difference between the price of the product and the price that the consumer is willing to pay for that product is known as consumer surplus. This is the economic benefit to consumers because they pay less than what they are willing to pay. The consumer surplus arises when the consumer is willing to pay more as compared to the market price for a specific product. “Consumer surplus is the difference between the total amount that consumers are willing to pay for service or good and the total amount that they do pay.” Consumer Surplus Formula Consumer Surplus = Consumer Willingness to Pay – Market or Actual Price Consumer Surplus Example with Diagram When consumers
Infrastructure and Types of Infrastructure
In this post, you will learn about the little history of infrastructure, infrastructure definition and types of infrastructure in details. The word infrastructure first used in French in 1875. Later on, this word was used in English in 1887, the original meaning of infrastructure is “the facilities that form the basis of any operation or system". This word was imported from the French language, where it was used for the substrate floor surface. This word is a combination of “infra” and “structure", where “infra” means below that’s why many of constructions are underground like water system, gas system, tunnels, and underground railways and “structure" came from Latin word "Structura". This word became popular in the US in the 1940s after the creation of NATO, North Atlantic
Diversified Investments and Ways to Achieve
During the boom in the market, it is almost impossible for a supplier to sell a stock at a price which is less than the purchase price. However, we can never be certain what the market will behave at any given time; we must not fail to remember the significance of well-diversified investments or portfolio, regardless of the market situation. To establish an investment strategy that offsets the possible losses in a market, the investor class suggesting the same as the real estate marketer advocates for buying a home by focusing on "location". In simple terms, you should never put all of your eggs in the same basket. This is the point where rational people need diversification. Before going into details