Direct and indirect effects could happen as the money supply increases; the direct effect being that people will demand more goods and services and the indirect effect being that people will save more money, depositing this in banks (Monetary Policy, n.d.). Therefore, excess reserves will also increase and the banks will be able to lend out more. Banks will motivate borrowing by lowering interest rates and this will increase the demand for investment and consumption and therefore aggregate demand will increase. Businesses respond to increased sales by producing more, thus increasing production. An increase in production would require more labor, thus lowering unemployment, and raises the demand for capital goods.
The second method for measuring the significance level of these macroeconomic variables, we will use linear regression analysis in this research. Conclusion Stock market play very important task in the economic growth and development. Efficient capital market can improve the growth and wealth of the economy by maintaining the financial segment and with delivery of a good channel for investment which play a very important role to engage domestic and foreign investors. The stock market performance can be measured by changes in its index which is motivated by different factors including macroeconomic social and political factors. The objective of this research is to search out effect of macroeconomic variables including money supply, discount rate, gross national savings, inflation, and GDP etc.
It also gives a facility to free flow of money to where it can be invested. As in different markets of the economy, the "undetectable hand" of the monetary business sector is, under budgetary liberalization, anticipated that would know how to match supply also, request effectively. Furthermore, the "undetectable hand" has the capacity distinguish who needs to spare and/or loan, for what purposes, and in addition who needs to obtain and on what terms. All above arguments is in the favors of financial liberalization and show financial liberalization has many benefits in financial markets. financial liberalization are good for financial market and it help to grow financial system and also help to grow economy of the nation in general.
Monetary policy is one of the utmost significant policy to manage aggregate demand. Like other policies, the prime objectives of monetary policy to accomplish the macroeconomic aim or objectives such as stability, growth, full employment, satisfactory BOP and so on. Foreign exchange reserve plays dynamic role in the aggregate economic activities of the nation. As a developing nation Nepal, the demands for foreign exchanges are high for different types of development arrangement, trade and repay the debt and its interest. Foreign assets reserve affects money supply of the nation and money supply affects on different macroeconomic variables like price level, interest rate, exchange rate, exports, imports, production and employment which eventually
This paper will be discussing the effects of trade liberalization on economic growth. I. Introduction: Today, most of the economic literature believes that trade liberalization leads to an increase in growth which in return leads to an increase in a society’s welfare. So if we think about it, import restrictions of any kind create an anti-export bias by raising the price of imported goods relative to exported ones. Through trade liberalization there will be a shift of resources from the production of import substitutes to the production of export-oriented goods.
Also, it refers to the general price level increase because of increasing of consumer which is manifested in consumer price index (CPI). CPI is used by the consuming public to recognize how their purchasing power is getting effected. It aims to compare the cost of purchasing the market basket bought by a typical consumer during a specific period with the cost of purchasing the same market basket during earlier period. (Gwartney, James D.; Stroup, Richard L.; Sobel, Russell S. 1999) Due to real factors, the demand-Pulled Inflation will occurred by issues such as: fall in tax rates, without change in government spending, increase in investments, increase in government spending without change in tax revenue, decrease in savings, increase in exports, and/ or decrease in imports. For instance, buyers started generating more income or more volume of money, thus there will be high demand and the price of the goods or services will be increased.
It establishes the nexus between the tax system and economy of a country hence I will aim at showing the role of the tax law in increasing a country’s economic growth. It defines the concepts of tax law (and related terms such as taxation) and economic growth, as well as explain how they manifest in the society. I will then establish the relation between the two concepts and conclude with the various ways in which tax law increases economic growth. Economic growth refers to the increase in a country’s productive capacity as measured by comparing the gross national product (GNP) in a year with the GNP in the previous year. Economic growth therefore means an increase in real GDP.
Quantitative easing can be classed as a monetary policy that is used as an extension of the cash supply to buy assets. In other words, Quantitative easing assigns a utilization of monetary policy that is exercised in the smooth transitioning of the economy. Usually, the central banks provide a back up support to banking sector post any crisis, to ease pressure by pumping money into markets, which helps the banking sector to try and maintain the lending level. Central banks are normally responsible for keeping the inflation rates and bank rates under the target range as set by the governments, considering the economic conditions that would encourage the economy by an increase in spending. Quantitative easing usually involves a structure where
The combination of the expenditures on human capital also matters in the endogenous growth models that there are important and direct relations between the government expenditures like education, health, social protection and social security and economic growth. Education is one of the most important factors that contributes to the sustainable economic growth and competitiveness of the countries. Therefore, it is expected that education expenditures contribute to the economic growth by increasing the efficiency and productivity levels of individuals. Health expenditures have multiple contributions to economic growth in both the short-run and long run. Healthy workers become
And for economies to progress, banking and financial institutions have a huge role as they are institutions of money market which provides funds (through loan), helps government (by lending short term funds at low interest rates on the basis of treasury bills) and plays a role in monetary policies and financial motility along with primary banking services. They also contribute significantly to national output as well as to credit creation in an economy. Thus in developing countries like India where this sector also has a significant impact on efficiency of resource mobilisation and allocation in real economy to generate higher rate of growth , it is necessary for banking sector to change or transform radically in order for Indian economy to stay stable or grow with respect to global financial market. Further, after nationalization of major Indian banks in 1969 and 1980 serious problems like a decline in productivity and efficiency, and erosion of the profitability of the banking sector emerged where the quality of loan portfolio deteriorated which, in turn, came in the way of banks income generation and enhancement of their capital funds. Inadequacy of capital accompanied by inadequacy of loan resulted in loss provision and into the adverse impact on the depositors’ and investors’ confidence.