article: http://www.economist.com/displaystory.cfm?story_id=13248177
Summary:
This article that I’ve read talks about how the bank of England handles the effects of recession. The central bank lowered the interest rate thus bringing the base rate to 0.5% on March 5th. Bank of England then announced setting up “quantitative easing” which can give another way to enhance the economy. “Quantitive easing” is a new method that helps prevent deflation and can lower interest rate for easier use and increase money supply. Consumer-price inflation has decreased from 5.2% of commodity last 3% and now the central bank expects that GDP will decline further by the end of 2009. This is the lowest decline over many years. With the new method, Central bank will try to save their falling economy.
connections:
The main connection to our chapter 6
is Gross Domestic Product (GDP). GDP refers to the value of goods and services produced by one country in one year. By lowering GDP, it would also lower the employment rates of inflation. Vise Versa, increasing GDP would increase employment and increase prices. In this article, the bank of England is trying to lowering employment rates and interest rates to prevent a falling economy thus lowering their GDP. Another connection would be full employment level of GDP. In the article, by lowering GDP, it meant employment rates of inflation, and some workers would be unemployed.
Reflections:
I believe at this time of recession, just by lowering interest rates of employments rates would not make huge changes to the recession. I’ve read other articles about countries recession, and it appears GDP is expected to worsen. Many countries are beginning to fall due to the lower dividends and interest rates. If there is a further decrease in employment, I think it would lower the GDP thus causing more unemployment. With this in mind, I think the only way to prevent the economy from further unemployment is to create more employment opportunities. This way it can strengthen countries’ economy.
