International aspects Definition Exchange rate: The price of one’s currency in terms of another currency Foreign exchange market: The market where currencies are bought and sold. Exchange control: Limits on the amount of foreign currency available to...
Role of taxation in promoting equity Tax is a fee charged ("levied") by a government on a product, income, or activity. Why taxes are imposed? There are different reasons for imposing taxes. To finance government expenditure. One of the most important uses of taxes is...
Government policy to control inflation Government uses a number of policies to deal with the different types of inflation. These are: Demand Side policies-to control demand pull inflation Deflationary fiscal policy: This involves an increase in taxes and lowering of...
Government macroeconomic objectives and policies Most of the governments round the world have four main objectives. These are Keep inflation under control Maintain a low level of unemployment Achieve a high level of growth rate Maintain a healthy balance of payments....
Government Policy Definition Monetary policy: The process by which the government, central bank, or monetary authority of a country controls the supply of money, availability of money, and cost of money or rate of interest, in order to attain growth and stability of...
Consequences and Costs of Inflation: Personal Costs: Reduce purchasing power Real income falls People like pensioners and students on fixed incomes will suffer from inflation. Low paid and non-unionized workers often fail to get sufficient rises to stop real income...
International labour organization The International Labour Organization (ILO) measure of unemployment assesses the number of jobless people who want to work, are available to work and are actively seeking employment. It is used internationally so comparisons can be...
Ideas Price change over time (inflation) is always given per period of time. Deflation can be a cause for concern – deflation will usually occur when demand for goods and services are falling, causing firms to lose profits, profits and reduce workforce. This will...
How to measure inflation Measured by CPI (Consumer Price Index) RPI (Retail Price Index) A base year or starting point is chosen. This becomes the standard against which price changes are measured. A list of items bought by an average family is drawn up. This is...
Calculating the CPI/RPI: Indices express change in prices of a number of different products as a movement in a single number. Average of ‘basket’ of products in first year calculation or base year is given the number 100. If on average the basket rises overall...
Uses of CPI/RPI Data: As economic indicator – CPI is widely used measure of price inflation, and therefore is measure of changes in cost of living. Governments try to control inflation using macro-economic policies. The CPI will be used by workers to seek wage...
Problems with Price Indices: Over time typical household basket of goods and services will change. CPI needs to take account of this, but deciding how and when to make them can be difficult. Changes due to: Fashion and taste Introduction of new goods and services...