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

Macroeconomics Theory - Case Study Example

Cite this document
Summary
1. Lowering interest rates will counter consumer’s pessimistic view on the economy, and thus they will purchase goods available locally rather than purchasing imported products. People hold money as a store of value, conduct transactions and precautionary reasons. As interests…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92% of users find it useful
Macroeconomics Theory
Read Text Preview

Extract of sample "Macroeconomics Theory"

How to Stabilize Interest Rates Lowering interest rates will counter consumer’s pessimistic view on the economy, and thus they will purchase goods available locally rather than purchasing imported products. People hold money as a store of value, conduct transactions and precautionary reasons. As interests rates go higher, people are less willing to hold money because it opportunity costs increases, as portrayed by the graph below.Interest rates Money supply Money demand Quantity of Money2. To reduce increase in household consumption, I would increase interest’s rates, in a bid to discourage consumption, and encourage savings because rewards for saving will be higher.3. One of the major policies FED should practice to achieve desirable interest rates at varying economic times is independent policy.

They should acknowledge the time inconsistency fact, and set up an independent policy, that which is not controlled by central government. Through this, policy makers should find it in public interest, to keep interests rates low, to keep down consumers and businesses expectations on inflation. This would maintain labor compensations relatively cheap, which would in return maintain favorable prices and increased output in the market.To ensure success of such policy, government should oversee that the independent policy makes full discretion to the public all relevant information when adjusting monetary policy, which causes adjustments of interests rates.

Inflation rateAutonomous inflationactual inflation Output gap Actual output potential output Real GDPFrom the graph above,this paper suggests that when the real inflation is controlled by an independent policy, interest rates will adjust with prevailing economic times, and the output gap is filled through provision of labor at favorable market prices.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Macroeconomics Theory Case Study Example | Topics and Well Written Essays - 250 words”, n.d.)
Macroeconomics Theory Case Study Example | Topics and Well Written Essays - 250 words. Retrieved from https://studentshare.org/macro-microeconomics/1667641-macroeconomics-theory
(Macroeconomics Theory Case Study Example | Topics and Well Written Essays - 250 Words)
Macroeconomics Theory Case Study Example | Topics and Well Written Essays - 250 Words. https://studentshare.org/macro-microeconomics/1667641-macroeconomics-theory.
“Macroeconomics Theory Case Study Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/macro-microeconomics/1667641-macroeconomics-theory.
  • Cited: 0 times

CHECK THESE SAMPLES OF Macroeconomics Theory

Inflation in the United States

Inflation is an issue of concern to almost every country of the world.... According to Dimson, Marsh, & Staunton (2012), inflation could be identified as a rise in general price level that result to a decline in the purchasing power of a country's currency.... … The most reliable measure of inflation levels is the overall consumer index (CPI-U)....
3 Pages (750 words) Research Paper

Effects of Rising Economic Role of China on High Levels of Unemployment in the EU and USA

This essay questions the opinion, that rising economic strength in China will result in continued high levels of unemployment in the European Union and the United States.... China's growing volumes of exports are considered as a big threat to macroeconomic stability of the EU and the US in the essay....
4 Pages (1000 words) Essay

Macroeconomics: Theory and Policy

This paper "Macroeconomics: theory and Policy" presents planning that is a useless endeavor because developments in e-business/e-commerce and in the political, economic and societal environments are moving too quickly nowadays.... hellip; The debate over the planned economy and free-market mechanism started long ago when the classical economists refuted the mercantilists' theory.... This mercantile theory was strongly opposed by Adam Smith, who emphasized on the 'invisible hand' and 'laissez-faire'....
10 Pages (2500 words) Assignment

The theory of endogenous money

Taking into account different observations pointed out by certain theorists, it id identifiable that the two elaborated versions obtained from the Keynesian theory… According to their assumptions regarding how banking systems and monetary authorities behave, monetary economy behaves differently from real exchange economy (Keen and Grasselli, 2012:1).... Despite the idea endogenous money theory based its arguments on classical economics, it proved a constructive attempt for providing alternative theoretical framework for dealing with unsatisfactory IS/LM model....
4 Pages (1000 words) Essay

Communuication Ethics, and Society

Scholarship on media economics draws from both microeconomics and Macroeconomics Theory.... Scholarship on media economics draws from both microeconomics and Macroeconomics Theory.... Economic theory on the factors that inform the content of the Americans news and Entertainment media stipulate that media content is fueled by financial motivations.... Popular long-running Communication, Ethics, and Society Communication, Ethics, and Society Introduction Economic theory on the factors that inform thecontent of the Americans news and Entertainment media stipulate that media content is fueled by financial motivations....
1 Pages (250 words) Assignment

Long-Term Investment Decisions

This is so because consumers are much sensitive to any small changes in price of the commodity (Samuelson & Nordhaus, 2010).... However goods which are of… Such is the case of low calorie, frozen microwaveable food company. Raising prices in the low calorie, frozen microwaveable food company will not The consumer will have to consume the commodity as normal even if the prices are increased....
5 Pages (1250 words) Essay

Unemployment in Trinidad and Tobago 1997-1996

?Macroeconomics: theory and policy.... ?macroeconomics and new macroeconomics.... This case study is represents an analysis of the unemployment rates in Trinidad and Tobago from the period before the second World War when the country depended majorly on agriculture as a source of economic growth as well as employment....
2 Pages (500 words) Essay

Short-Term Company Outlook: Citigroup Incorporated

The macro-economic environmental influences the business environment in determining the ability of a business in generating profit.... Citigroup Incorporation is one of the… Indeed, the recent financial crisis depicts how the macro-economic environment is critical in determining the financial performance of Citigroup....
3 Pages (750 words) Case Study
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.
Contact Us