Monetary policy and fiscal policy can defined as demand-side policy, both seek to influence AD. Monetary policy include the rate of interest, money supply and exchange rate.
A low interest rate tends to encourage people to save less and consume more, and companies to invest more as it is cheap to borrow. If it is high interest rate, people in foreign country tends to place more their money in UK financial institution to gain high interest in return.Therefore, the demand for pounds increases, push up the value of pound, thus rise in exchange rate. When exchange rate increases, SPICED. Imports cheap and export dear. There is a likelihood to cause current account deficit ( money leaving the country exceed money coming into the country).In turn, Monetary policy can be used to adjust the position of current account of balance of payment.
Sunday, 15 March 2009
Fiscal policy
It is one of the three main government policies to achieve macroeconomic policy objectives. Fiscal policy refers to the tax and spending decisions of government. It main aims is to influence aggregate demand. Aggregate demand is made of consumer expenditure, investment, government spending and net exports. To increases AD by fiscal policy which is called reflationary, it can be done by reducing tax, or increasing government spending.
There are two types of tax, direct tax which is the tax on income and indirect tax which is tax on goods and services. Direct tax is also a progressive tax whereas tax at a higher percentage on income of the rich. Indirect tax which largely is regressive tax ( tax at a greater percentage on income of the poor) . By reducing these two types of taxation, comsumper expenditure tends to increase, as consumers might have more disposable income and buy more goods with the same amount of money in hand.
Government spending is made up of capital expenditure ( roads, hospitals), current expenditure (running of public services ), debt interest payment ( interest payment made to debts holder), transfer payment (money transfer from taxpayer to those received the benefits). By increase government spending, people might benefits from them in term of money or services and tends to have greater purchasing power, therefore, increase AD.When there is a rapid increase in AD, but aggregate supply did not increases the output at the same speed, government might use fiscal policy to reduce AD, thus prevent inflation.
When there is a budget deficit (Government spending is more than revenue of taxation), government may use fiscal policy to reduce budget deficit by reduce government spending or increase tax.
There are two types of tax, direct tax which is the tax on income and indirect tax which is tax on goods and services. Direct tax is also a progressive tax whereas tax at a higher percentage on income of the rich. Indirect tax which largely is regressive tax ( tax at a greater percentage on income of the poor) . By reducing these two types of taxation, comsumper expenditure tends to increase, as consumers might have more disposable income and buy more goods with the same amount of money in hand.
Government spending is made up of capital expenditure ( roads, hospitals), current expenditure (running of public services ), debt interest payment ( interest payment made to debts holder), transfer payment (money transfer from taxpayer to those received the benefits). By increase government spending, people might benefits from them in term of money or services and tends to have greater purchasing power, therefore, increase AD.When there is a rapid increase in AD, but aggregate supply did not increases the output at the same speed, government might use fiscal policy to reduce AD, thus prevent inflation.
When there is a budget deficit (Government spending is more than revenue of taxation), government may use fiscal policy to reduce budget deficit by reduce government spending or increase tax.
Saturday, 14 March 2009
Ten questions and my answers
1. Why does a 500 pounds tuxedo rent for 90 pounds a day while a 20,000 car rents for only 40 pounds?
MY answer: The 'life' of tuxedo is much shorter than car,it is easily run out of fashion while car does not. And the posibility of people rent a tuxedo instend of buy one is very high, it is because male do not wear tuxedo frequently and it might be not 'nice' if they wear it again in next ceremony or any party. Suppliers have to wash the tuxedo when customer return it to them, thus the cost is high. If any damage on the tuxedo, people will have to buy it, it might not seen to be a problem whereas people have to buy a 20,000 pounds car, people will use it with care. In general, people would rent a car for few days, but for tuxedo it normally would be only one night.
2. why do female models earn so much more than male models?
MY answer : Simply female models sacrifice much more than male models. Sometimes, female models are required not to wear cup on the T stage. The demand of female models is much more than male models, therefore, when there is an increases in demand, and the supply cannot meets the demand, the prices go up. Femaled models need to go to spa, have cosmetics to keep their beauty,therefore, the cost is high. last, the requirement to become a female model is much higher than male models.
3. Why might retailers deliberately hammer dents into their own appliances?
MY answer:I do not understand the question.
4. Why do the keypad buttons of drive-up cash machines have Braille dots?
Answer: It is for the convience of the blind people to enter the amount of cash they want to withdraw.
5.Why are child safety seats required in cars but not in airplanes?
MY answer :The rate of accident of airplanes is much much less than cars. In the car, parents or adults might not to able to have full attentions on childs, whereas, they could pay full attentions to their child.
6. Why are whales, but not chickens, in danger of extinction?
MY answer : chickens live in the land, people had figure out how to reproduce it mutiplitly, such as million by million, if not, i am wondering how the chickens form KFC, Mcdonald are produced.Now, there is an important point to consider. Chicken have financial values while whales does not. as the results, people concerned about chicken and not whales.As we know whales live in the deep sea, it is hard for human to trace them and keep an eyes on them. The pollution in sea also threaten them, and it is hard for human to built up an giant area to feed them.
7.Why is there a light in your refrigerator but not in your freezer?
MY answer: I really dun know, because i saw my friend`s have light in both refrigerator and freezer now.
8.Why do 24-hour convenience stores have locks on their doors?
MY answer : I believe 24-hour convenience stores would close when there is a storm or heavy snow. And sometimes it is locked when there is an emergency, or lock the door just for few minutes to arrange the stocks.
9.Why are newspapers, but not soft drinks, sold in vending machines that allow customers to take more units than they paid for?
MY answer : I never heard that before, i will check out with someone and answer the question.
10. Why are brown eggs more expensive than white ones, even though the two types taste the same and have identical nutritional value?
MY answer : I think the reason might be the hens does not produce brown eggs as much as white eggs do, so the brown eggs are seen to be scarce resources, therefore, the prices would be higher.
MY answer: The 'life' of tuxedo is much shorter than car,it is easily run out of fashion while car does not. And the posibility of people rent a tuxedo instend of buy one is very high, it is because male do not wear tuxedo frequently and it might be not 'nice' if they wear it again in next ceremony or any party. Suppliers have to wash the tuxedo when customer return it to them, thus the cost is high. If any damage on the tuxedo, people will have to buy it, it might not seen to be a problem whereas people have to buy a 20,000 pounds car, people will use it with care. In general, people would rent a car for few days, but for tuxedo it normally would be only one night.
2. why do female models earn so much more than male models?
MY answer : Simply female models sacrifice much more than male models. Sometimes, female models are required not to wear cup on the T stage. The demand of female models is much more than male models, therefore, when there is an increases in demand, and the supply cannot meets the demand, the prices go up. Femaled models need to go to spa, have cosmetics to keep their beauty,therefore, the cost is high. last, the requirement to become a female model is much higher than male models.
3. Why might retailers deliberately hammer dents into their own appliances?
MY answer:I do not understand the question.
4. Why do the keypad buttons of drive-up cash machines have Braille dots?
Answer: It is for the convience of the blind people to enter the amount of cash they want to withdraw.
5.Why are child safety seats required in cars but not in airplanes?
MY answer :The rate of accident of airplanes is much much less than cars. In the car, parents or adults might not to able to have full attentions on childs, whereas, they could pay full attentions to their child.
6. Why are whales, but not chickens, in danger of extinction?
MY answer : chickens live in the land, people had figure out how to reproduce it mutiplitly, such as million by million, if not, i am wondering how the chickens form KFC, Mcdonald are produced.Now, there is an important point to consider. Chicken have financial values while whales does not. as the results, people concerned about chicken and not whales.As we know whales live in the deep sea, it is hard for human to trace them and keep an eyes on them. The pollution in sea also threaten them, and it is hard for human to built up an giant area to feed them.
7.Why is there a light in your refrigerator but not in your freezer?
MY answer: I really dun know, because i saw my friend`s have light in both refrigerator and freezer now.
8.Why do 24-hour convenience stores have locks on their doors?
MY answer : I believe 24-hour convenience stores would close when there is a storm or heavy snow. And sometimes it is locked when there is an emergency, or lock the door just for few minutes to arrange the stocks.
9.Why are newspapers, but not soft drinks, sold in vending machines that allow customers to take more units than they paid for?
MY answer : I never heard that before, i will check out with someone and answer the question.
10. Why are brown eggs more expensive than white ones, even though the two types taste the same and have identical nutritional value?
MY answer : I think the reason might be the hens does not produce brown eggs as much as white eggs do, so the brown eggs are seen to be scarce resources, therefore, the prices would be higher.
Friday, 13 March 2009
the place where my sociology hw is
hi, Mr.chris, i had done one of my sociology hw, it is in my account but different blog. You click my photo, under My blogs, there is one called sociology, my hw is at there. :) Thank you very much for the revision packT.T...
Tuesday, 10 March 2009
Monday, 9 March 2009
homeworkT.T
I wanted to write something about why there is so much homework and i cannot finish them, but then i decide i better do some homework, it is much helpful.
Demand pull inflation, which is mainly caused by an increases in aggregate demand. The factors are:
Increases in
- income
- expected income
- wealth
- population
- confidence
- goverment spending
- productivity
- forgein income
And a decreases in interest rate and exchange rate.
Cost push inflation is mainly caused by an decrease in aggregate supply. The factors are
An Increase in
- cost
- wage
And an decrease in productivity of product markets.
Ok, now i am going to learn all the diagrams>.<. Good night to everyone.
Sunday, 8 March 2009
what will happen if a country printed money blindly
The result is very obvious, it will cause Inflation.
The available resources of a country is limited. There is the equal amount of money to be balanced with the amount of resources. Example, a bottle of water cost 1 pound. if too much money printed, it may cost 5 pound to buy a bottle of water.
In a short run, the production capacity of a country is fixed, a sudden amount of money flush into market will results an increases in prices of products,which is actually a decrease in the value of money. It can be understand as an increases in income caused Demand pull inflation.
The available resources of a country is limited. There is the equal amount of money to be balanced with the amount of resources. Example, a bottle of water cost 1 pound. if too much money printed, it may cost 5 pound to buy a bottle of water.
In a short run, the production capacity of a country is fixed, a sudden amount of money flush into market will results an increases in prices of products,which is actually a decrease in the value of money. It can be understand as an increases in income caused Demand pull inflation.
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