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?

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 2 years ago

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