Monetary policy

Monetary policy

We have already looked at one aspect of demand-side policy, fiscal policy, and it is important that we also understand the other type, monetary policy.  Monetary policy is the use of the interest rate, and money supply, in order to affect the level of aggregate demand in an economy.  We also need to appreciate that …

Fiscal policy

Fiscal policy

We have now looked at the 5 different macroeconomic objectives of governments (low and stable inflation, low unemployment, stable economic growth, promoting equity and a favourable balance of payments), and the next step is to look at the government policies available to try and meet these objectives.  The types of policies can be split into …

Deflation

Deflation

Although governments have the objective of low inflation, it doesn’t necessarily follow that if inflation is bad then the opposite, deflation, is good.  We have already looked at inflation and seen that it is a rise in the average level of prices in an economy over time; but we need to be careful to distinguish …

Deflation

Deflation

As well as studying inflation, it is important that we also study the reverse, i.e. deflation.  It is important that we know about the causes and consequences of deflation so that we are able to evaluate which is worse inflation or deflation.  Although some may think that because inflation is bad it must follow that …

Nominal and Real – Cinema tickets

Nominal and Real – Cinema tickets

The difference between nominal and real data is an important distinction.  The two links above show the amount of revenue generated by different films both in nominal and real values.  You can see the impact that adjusting for inflation has on films, especially the longer the time period is.  Look at Avatar and Gone with …