Buy custom Should Britain Join the European Union
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| Topic: |
Business
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| Number of pages / Number of words: |
20 / 5330 |
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The UK government has 3 major macro economic objectives and 2 on a slightly smaller scale: i) a high, but stable rate of economic growth within the UK's potential ii) high, but stable employment iii) low inflation iv) balance of payments equilibrium and v) fair and equal distribution of income.
In order to balance these objectives, governments use policies to control various aspects of the economy, however, in the analysis that follows, it will be shown that the most important of these policies, Monetary policy, would be rendered unusable to control the UK economy should the single currency be adopted and others will be curtailed...
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Fig 3 shows a shift to the left of the Aggregate Demand (AD) curve caused by a rise in interest rates, this leads to a lower equilibrium price level. Loosening monetary policy by lowering interest rates shifts the AD curve to the right and leads to a higher equilibrium levels of prices (fig 4). In this situation, this would lower consumer expenditure since there would be a higher incentive to save and more costly to borrow...
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