Economic factors How to stimulate growth Running

Economic factors

How to stimulate growth Running A deficit Cutting interest rates Economic growth Affecting on supply

Forms of unemployment Cyclical Frictional Structural Real wage Seasonal

How to reduce the level of unemployment? ↓AD ↓r ↑G Monetarists UE and Inflation can coexist Keynesians Free up ↑S ↓UE UE and Inflation can not coexist

Imperfections in the labour market Workers have: • wrong skills • wrong place • inadequate info • immobility Natural Rate of Unemployment (NAIRU)

Types of inflation Demand-pull • Demand is growing faster than supply Cost-push • Cost of factors of production increases Imported Inflation • Weakening currency increases cost of import Monetary Inflation • Over expansion of money supply Expectations effect • Anticipated level of inflation determines the future inflation

Balance of payments Current Account Capital & Financial Account

Balance of payments deficit 1. Reducing overall demand: ↓demand for import ↓ Inflationary pressure ↓export prices ↑ Unemployment 2. Increasing interest rates: ↓ demand for import ↓ investment currency strengthen ↑export prices Expenditure-reducing strategies 1. Import controls: a)Direct b) Exchange controls 2. Boost export: a)Subsidies b)Export credit guaranty 3. Lower the exchange rate: a)Devaluation b)Depreciation Expenditure-switching strategies