1.Why do countries with less independent central banks tend to have higher inflation rates? Is it...

1.Why do countries with less independent central banks tend to have higher inflation rates? Is it possible for the central banks to increase output and reduce unemployment in the long run? In the long run, is the German model a good one? Explain why or why not.

2. In your opinion, what are the top three challenges in the global economy we face in the near future?

Solutions

Expert Solution

Why do countries with less independent central banks tend to have higher inflation rates?

Countries with less independent central banks have governments that can make discretionary monetary policies. The problem with such policies is that they are highly influenced by politics and also the ideals of political leaders. Furthermore, such political leaders come and go. However, the policies that they implemented will be still in place. As such, if one regime instituted bad policies, a negative impact will be felt on the economy which will, in turn, cause inflation.

Is it possible for the central banks to increase output and reduce unemployment in the long run?

Yes. By increasing the output, the banks increase the supply of money in the economy. This means that money will be easily available for different business ventures. For instance, companies can easily access loans to increase or improve their operations. Also, people can access loans to start their own businesses. Such operations and new businesses will further develop and more people will be required to run them properly. As such, employment opportunities will be created.

In the long run, is the German model a good one? Explain why or why not.

Yes, it is. This model creates a closer relationship between the financial and industrial sectors. This ensures that industries will easily access funds to further their projects. The system also advocates for vocational education and training. This is important as it produces skilled people who can employ themselves instead of waiting to be employed. Also, if they are employed, such people will not require further training by companies. This saves resources.

In your opinion, what are the top three challenges in the global economy we face in the near future?

1. The threat of new and re-emerging diseases is increasing. For instance, Coronavirus.

2. Terrorism is becoming increasingly destructive and hard to prevent.

3. High population growth without increasing resources.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Average inflation rates tend to be higher in countries that have relatively weak judicial systems and...

Average inflation rates tend to be higher in countries that have relatively weak judicial systems and property rights (remember chapter 1 and the importance of secure property rights?). Why do you think this is the case? Would you expect these countries to have higher or lower national debt? Why?

why developing countries have high rates of inflation?

In the data from the text, we observe that countries with high inflation rates tend to...

In the data from the text, we observe that countries with high inflation rates tend to have high nominal interest rates. What does this imply, if anything, about real interest rates in countries with very high inflation rates?

Explain why in recent years central banks in numerous developed countries have resorted to a near...

Explain why in recent years central banks in numerous developed countries have resorted to a near -zero interest rates or negative interest rate . Make sure to explain what is meant by negative interest rate policy . Which are macroeconomic consequences of such a policy ? Explain.

Do countries with greater central bank independence have higher unemployment or greater output fluctuations?

Faulkender and Smith (2016) find firms operating in countries with higher tax rates tend to use...

Faulkender and Smith (2016) find firms operating in countries with higher tax rates tend to use more debt. In years when tax rates are lower, firms are found to decrease leverage levels. Furthermore, they show firms in all countries borrow less than their full borrowing capacity. Requirement: Critically comment on these findings in relation to Modigliani–Miller (M&M) theory (with tax) by answering the following tow questions. . a) In what respect the above findings are consistent with the prediction of...

1. If inflation is expected to be relatively low, then interest rates will tend to be...

1. If inflation is expected to be relatively low, then interest rates will tend to be relatively low, other things held constant. A. True B. False 2. Ms Parker found two opportunities of investment A (rate of return 3%, standard deviation 6%) and investment B (rate of return 8%, standard deviation 4%). Investment B is better than Investment A (hints: calculate each CV and then compare each other). A. True B. False 3. The larger the standard deviation is, the...

The following questions deal with the structure of central banks. a. Should central banks be independent?...

The following questions deal with the structure of central banks. a. Should central banks be independent? Briefly list and discuss two (2) arguments, as discussed in class, to support your argument. b. What do we mean by the ‘dual mandate’ of the Federal Reserve Bank? Why does it matter? Explain using the concepts presented in the course. c. Why might deposit insurance mechanisms (like the FDIC) encourage banks to take on too much risk? Is deposit insurance, then, a bad...

1. Why do larger banks tend to have lower net interest margins? 2. What are some...

1. Why do larger banks tend to have lower net interest margins? 2. What are some examples of economies of scale for banks? And Diseconomies of scale? 3. What are some examples of economies of scope for banks?

Why do independent group designs tend to be less powerful than dependent group designs? What circumstances...

Why do independent group designs tend to be less powerful than dependent group designs? What circumstances give rise to dependent group designs not being more powerful than independent group designs?

Subjects