Economics

If you order your custom term paper from our custom writing service you will receive a perfectly written assignment on Economics. What we need from you is to provide us with your detailed paper instructions for our experienced writers to follow all of your specific writing requirements. Specify your order details, state the exact number of pages required and our custom writing professionals will deliver the best quality Economics paper right on time.

Our staff of freelance writers includes over 120 experts proficient in Economics, therefore you can rest assured that your assignment will be handled by only top rated specialists. Order your Economics paper at affordable prices!

Economics

The Monetary and Fiscal Policies are the ways that our economy is kept under control. Both policies have their strengths and weaknesses, some situations favouring use of both policies, but most of the time, only one is necessary. The monetary policy is the act of regulating the money supply by the Central Bank. One of the main responsibilities of the Central Bank is to regulate the money supply so as to keep production, prices, and employment stable. The Central Bank has three instruments to manipulate the money supply. They are the reserve requirement, open market operations, and the discount rate. The most powerful instrument available is the reserve requirement. The reserve requirement is the percentage of money that the bank is not allowed to loan out. If it is lowered, banks are required to keep less money, and so more money is put out into circulation. If it is raised, then banks may have to collect on some loans to meet the new reserve requirement.

The instrument known as open market operations influences money and credit operations by buying and selling of government securities on the open market. This is used to control overall money supply. If the Central Bank believes there is not enough money in circulation, then they will buy the securities from member banks. If the Central Bank believes there is too much money in the economy, they will sell the securities back to the banks. Because it is easier to make gradual changes in the supply of money, open market operations are use more regularly than monetary policy. When member banks want to raise money, they can borrow from Central Bank. Just like other loans, there is an interest rate, or a discount rate, the third instrument of the monetary policy. If the discount rate is high, then fewer banks will be inclined to borrow, and if it is low, more banks will borrow from the reserve banks. The discount rate is not used as frequently as it was in the past, but it does serve as an indicator to private bankers of the intentions of the Central Bank to constrict or enlarge the money supply.

The monetary policy is a good way to influence the money supply, but it does have its weaknesses. One weakness is that tight money policy works better that loose money policy. Tight money works on bringing money in to stop circulation, but for loose policy to really work, people have to want loans and want to spend money. Another problem is monetary velocity. The number of times per year a Euro changes hands for goods and services is completely independent of the money supply, and can sometimes contradict the efforts of the Central Bank. The benefits of the monetary system are that it can be enacted immediately with quick results.

The second way to influence the money supply lies in the hands of the government with the Fiscal Policy. The fiscal policy consists of two main Instruments. The changing of tax rates, and changing government spending. The main point of fiscal policy is to keep the surplus/deficit swings in the economy to a minimum by reducing inflation and recession. A change in tax rates is usually implemented when inflation is unusually high, and there is a recession with high unemployment. With high inflation, taxes are increased so people have less to spend, thus reducing demand and inflation. During a recession with high unemployment, taxes are lowered to give more people money to spend and thus increasing demand for goods and services, and the economy begins to revive. A change in government spending has a stronger effect on the economy than a change in tax rates.

When the government decides to fight a recession it can spend a large amount of money on goods and services, all of which is released into the economy. Despite the effectiveness of the Fiscal policy, it does have drawbacks. The major problems are timing and politics. It is hard to predict inflation and recession, and it can be a long period of time before the situation is even recognised. Because a tax cut can take a year to really take effect, the economy could revive from the recession and the new unnecessary tax cut could cause inflation.

Politics are another problem. Unlike the monetary policy run by the Central Bank, the government initiates the fiscal policy, and so politics play a key role in the policy. When the concerns of the government are viewed, it becomes obvious that a balanced budget is not the primary objective, anyway. The fiscal policy can also be used as a campaign tactic. If tax cuts are initiated and government spending is increased, then the T is more likely to be re-elected, but has first to deal with the inflation his tactic caused. Monetary and fiscal policies are what helps keep the nation's economy stable. With them it is possible to control demand for services and goods and the ability to pay for them. It is possible to manipulate the money in private hands without directly affecting them. The policies are simply a myriad of Instruments used to prevent a long period where there is high unemployment, inflation, and prices, along with low wages and investment.

In Ireland the fiscal policy is based on wage agreements and unions for management and workers to slow wage growth while increasing job creation. There is a ten- percent corporate tax rate in international manufacturing and service companies in Ireland. The policy also includes high government expenditures for education, training programs, and the physical infrastructure. Finally, reform of tax and welfare to increase work incentives centred on supply-side reforms focused on trying to increase foreign investment and increase the competitiveness of goods produced in Ireland in the international marketplace. The EU also provides investment in Ireland, largely to improve the infrastructure. This policy continues to help Irelands economy prosper. The real GDP growth for Ireland has averaged about nine percent since 14, and Irish incomes have risen by over two-thirds since the early nineties. Unemployment has gone down drastically from 16 percent in 1 to below six percent in 1. This is due partly to former emigrants moving to Ireland and joining the labour force. The reduction in unemployment problems has, however, led to other problems brought about by such a fast growing economy. These include shortages of skilled and unskilled labour and overcrowded roads and houses.

Participating in the EMU has taken away Irish control of monetary policy and has thus moved the governments focus to fiscal policy. A main fiscal policy used by the government has been to cut income tax in exchange for relatively stable wages to increase employment. Now, as the economy is moving toward full employment, they hope to move toward more flexible union pays policy while still giving tax cuts to low and medium income earners. Monetary policy is under control of the European Central Bank. The Irish central bank still exists to implement the common European monetary policy through actions such as adjusting liquidity at the ECB set interest rate. Since 1, price stability has been a goal of the EMU. There is a yearly zero to two- percent increase in the consumer price index. The European Central Bank operates its monetary policy through buying and selling government securities. Ireland accounts for only one percent of economic activity among the Euro countries.

The Central Bank of Ireland came into being in 14 following the passing of the Central Bank Act 14. It replaced the Currency Commission, which functioned as the national currency issuing authority from 17 to 14. The Bank is now a member of the European System of Central Banks (ESCB) whose primary objective is the maintenance of price stability in the Euro area. The maintenance of price stability is also enshrined in the Central Bank Act, 18. The basic tasks of the ESCB are to define and implement the single monetary policy; to conduct foreign exchange operations; to hold and manage the official foreign reserves of the Member States; and to promote the smooth operation of the payment systems. The ESCB is also called upon to contribute to the smooth conduct of policies relating to the prudential supervision of credit institutions and the stability of the financial system.

The Governing Council of the European Central Bank is the central decision-making body in charge of monetary policy for the Euro area. The Governor of the Central Bank of Ireland is one of the 18 members of the Governing Council. The implementation of monetary policy decisions rests with the Euro system, comprising the ECB and the national central banks of the 1 member states, which have adopted the Euro. The Bank's other tasks include acting as agent for and banker to the Government. The Bank is statutorily responsible for the supervision of most financial institutions in Ireland including banks, building societies and a broad range of non-bank firms, exchanges and collective investment schemes. The Bank reports annually on its activities to the Minister for Finance, and a statement on the Bank's annual accounts, as audited by the Comptroller and Auditor General, is also published.

The Governor of the Central Bank appears before joint committees of the Oireachtas when requested. The Bank's Annual Report and Quarterly Bulletins, together with the Bank's Monthly Statistics, are a primary source of banking and related financial statistics on the Irish economy. Ireland is one of the member countries that now use the single European currency, the Euro. On January 1, 1, use of this new currency went into effect. The transition to a single currency has affected both the macroeconomic performance and policy of Ireland. There is strong control of public spending which reduces the need for government borrowing and increased taxes.

Irelands macroeconomic policy and performance must be formulated to fit the goals of the European System of Central Banks. The ESCBs objectives include balanced development of economies, growth without inflation, convergence, increased employment, elevating standard of living..The transition to the Euro has moved Irish policy focus from monetary to fiscal policy. The fiscal programs instituted by the government will hopefully allow Ireland to reach these goals.

The unemployment rate in Ireland has been declining due to the fiscal policies aimed at boosting employment. This lower unemployment rate is a result of Irelands efforts to improve their output and efficiency to meet standards for joining the EMU. The short-term interest rates have been declining. This encourages investment spending and boosts GDP. Irelands interest rates are affected by their involvement in the EU.The Irish Government has improved its fiscal policy and has moved out of a deficit and into a surplus. The 1 figure represents the planned budget, not the actual result. This change, from a deficit to a surplus, represents increased effort by the government to improve the economic conditions.

The Maastricht Treaty mentions EMU and refers to it together with the Single Market as one of the means by which the Union will promote economic and social progress that is balanced and sustainable. The treaty refers to the fixing of a single currency, the ECB, and a single monetary policy and exchange rate policy. The first stage began on 1 July 10 with the removal of exchange controls in 8 of the then 1 Member States, the inclusion in principle of all currencies in the narrow band of the Exchange-Rate Mechanism (ERM), and measures to encourage convergence. No new institutions were required. The second stage began on 1 January 14, with the newly created European Monetary Institute (EMI), based in Frankfurt, gradually assuming a coordinating role. Those countries that qualified undertook stage of EMU in early 1. At the beginning of Stage the participating states adopted the irrevocably fixed rates at which the Euro was to be substituted for national currencies. Stage also entailed the creation of a European System of Central Banks (ESCB), composed of the European Central Bank (ECB) and representatives of the national central banks.

The EMU gives birth to a market as big as the United States and backed by a single currency. It represents twenty percent of world economic output and eighteen percent of world trade. The Euro has quickly lead to huge capital flows in Ireland, making the Irish firms more competitive in the global marketplace. Businesses will save money; the costs of changing currencies from country to country will be sharply reduced. Comparing prices are quicker and interest rates are stabilised. All this will make long-term planning easier. The member countries are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

On 1 January 00 Euro notes and coin were put into circulation in all Euro zone countries and the process of withdrawing national currency notes and coins began. In Ireland the dual circulation period, during which both currencies were to be legal tender, lasted from 1 January 00 to February 00. During the dual circulation period retail outlets had to accept both Irish pounds and Euro but gave change as far as possible in Euro only. Following the removal of legal tender status from Irish pound notes and coins was on midnight on February 00, retailers were no longer be obliged to accept Irish pound cash as a means of payment. Bank of Ireland continued to accept Irish pound cash for a period after this date.

The value of the Euro was determined by economic conditions in the Euro area and particularly by maintaining price stability. Countries will only be allowed to join Economic and Monetary Union when their economic conditions have converged toward those in the Euro area so that their entry should not impact significantly on the value of the Euro. During the three-year transition period, 1-00, European companies converted their accounts to Euro. Then, in 00, Euro notes and coins were circulated in the different countries. In May 18, bilateral exchange rates between participating currencies were introduced.

Since World War II, Europe has been moving toward integration and with the creation of the Euro, they have made a giant step toward uniting Europe. The Euro will have immediate benefits. People travelling or simply shopping among participating European nations will immediately benefit from being able to compare prices for similar goods without needing a calculator. Not only will the exchange rate become irrelevant, but the costs of converting between currencies will also be eliminated. Because of the savings related to currency conversions, one-third of firms expects short-term earnings gains from the introduction of the Euro, and three-quarters expect long-term benefits to the bottom line. The Euro will make life easier for the people of Europe.

Please note that this sample paper on Economics is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Economics, we are here to assist you. Your cheap custom college paper on Economics will be written from scratch, so you do not have to worry about its originality.

Order your authentic assignment and you will be amazed at how easy it is to complete a quality custom paper within the shortest time possible!