Reference no: EM133543979
Assignment:
Background
Inflationary pressures are broadening out beyond the food and energy sectors almost everywhere, with businesses throughout the economy passing on higher energy, transportation and labour costs by raising prices. (OECD 2022)
With the global economic cycle turning downwards and monetary tightening by most of the major central banks increasingly taking effect, headline inflation is projected to peak in the current quarter in most major economies, and to decline in the fourth quarter and throughout 2023 in most G20 countries. (OECD 2022)
The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 21 September 2022, the MPC voted to increase Bank Rate by 0.5 percentage points, to 2.25%. (BoE, 2022)
Raising interest rates makes borrowing more expensive and - it is hoped - this can encourage people to save more. As a result, they will buy fewer things and prices will stop rising as fast. But when things like rising energy prices worldwide cause inflation, there is a limit as to how effective UK interest rate rises can be in slowing inflation. (BBC, 2022)
Main Question: Explain the meaning of inflation and why it is considered to be an important objective for the government. Apply relevant economic analysis to evaluate whether monetary policy is the best method that can be used by the central bank to reduce inflation.
LINK the discussion paragraph back to the question, to clarify how the point is relevant and how it contributes to the overall answer.
1. Explain what the question means
2. outline the key points of the discussion
3. State the argument you intend to take. This should include a brief statement of your final judgment.
4. Define and explain inflation
5. Give examples of inflation in specific countries
6. Explain and define the potential cause of the high and unstable rates of inflation or the benefits of the low and stable rates of inflation and how important they are. *with reference to the stimulus material provided
7. Explain how monetary policy could be used to reduce inflation
8. Explain with at least 2 alternative types (fiscal and supply-side) of policy that would work to reduce inflation
9. Explain why these alternative types would or would not be appropriate to use in this particular case
10. Give examples of how inflation has been tackled by different countries (Japan and the US) , including the UK.
11. Draw appropriate diagrams to show how each policy would work to reduce inflation.
12. Analyze the advantages and disadvantages of each policy to reduce inflation
13. Discuss the short vs. long-term impact of each policy-some. Policies may have an immediate impact, whereas others may be much more effective in the long-term
14. How will different demographic groups be affected by each policy in terms of welfare and living standards?
15. What are the potential consequences for each economic indicator of each policy?
16. Decide how effective each method would be
17. Evaluate each method. at the end of the discussion of each method, present a clear 'conclusion' in which you state whether you think the potential benefits of the policy outweigh the potential costs. indicate precisely who benefits from each method and who loses, as it may not be obvious whether the benefits outweigh the costs and vice versa
18. Give the overall judgment in relation to the question
19. Use the language of the question to show the direct relevance of your judgment
20. Summaries the judgment already made.