Posts tagged policy

How can Monetary Policy help people represented by Silver Cougars?

Angela Soracco of Silver Cougars of America has sent a letter quite concerned about the current inflation of 9%. Silver Cougars of America is an organization of senior citizens and they are being heavily relaint on Social Security day by day. How can the government implement monetary policies to help old seniors to lay off the inflation burden?

There are two ways to control the inflation. First is to increase the interest rate and second is to cut down the money supply on the market. First of all, by increasing the interest rate, many people will tend to save their money and not spend. This will lower the demand-pulled inflation to some degree. Also, by cutting down the money supply flowing through the market, the value of the currency will go up and therefore it will lower the inflation rate.

Nonetheless, there is one serious drawback to this policy. It will aggravate the negative economic growth and skyrocket unemployment rate in return. So, there is a trade off. Governments would look at the opportunity costs of implementing this policy and consider whether it will be worth of a try or a bad choice.

Advertisements

Leave a comment »

Scrappage sees UK car sales surge

BBC News Article: Click Here

_46672444_carsales

In UK, there has been a tremendous increase in their car sales. “The Society of Motor Manufacturers and Traders (SMMT) said 168,942 new cars were registered last month, an increase of 31.6% compared with October 2008.”

There are several reasons to how the UK car sale surged:

  1. There was a government policy in increase VAT for old cars starting from next year 2010. Many costumers wanted to avoid this, so there has been an increase in car sales.
  2. There was another government policy in supporting old car owners to buy a new car. The government has supported these owners up to a £2,000 discount for replacing 10 year or more cars. This cost was said to be shared between the government and automobile producers.
  3. Consumer’s purchasing power has increased sharply, which led to more spending such as buying a car. This was due to reduced mortgage interest payment, lower utility bills and a moderation in inflation.

Looking at these 4 reasons, it is clear that government role in increase of car sales was pivotal. Many people criticize about government supporting for companies with deficit. However, government support is sometimes effective. Also, government policies in reducing mortgage interest payment, increasing VAT, and etc. was a good approach in lifting up the crumbled car industry.

Comments (2) »