Macro Economics Essay Example | Topics and Well Written Essays - 2000 words

Macro Economics - Essay lesson2011, p.204. The exchange coin bank of England has a duty to regulate the amount of money in the economy by various instruments at its disposal hence stabilizing economic fanfare. These st considergies are used by the substitution bank of England to control the rate of inflation, either by encouraging the public to spend more, or sonorous their spending rate depending on the prevailing economic conditions (Joyce, et.al. 2010, p. 176). Central bank applies both conventional and unconventional strategies to regulate the rate of inflation in United Kingdom. In order for the central bank to jut out the means they will use to manipulate the rate of inflation in the economy effectively, they should be able-bodied to predict the trend of economic advancement at least two years in advance. When the central bank of England increases the amount of money in circulation, they encourage public to spend more, thus pushing the rate of inflation high (Benford.e t.al, 2009, p.48). If the central bank decreases the amount of money in circulation, they will discourage sight to spend more hence reduce the rate of inflation. Asset Purchases financed by Central Bank bullion Quantitative Easing High inflation results to overspending by both individuals and business. This results to decline in saving major power of the consumers (Benford.et.al, 2009, p.47). It also affects the lending power of the financial institutions. The central bank of England has mandate to regulate the rate of inflation of the country by playing around with the interests which they charge the financial institutions. During the time of high inflation, the central bank of England will increase the interest rates of the lenders. This high interest rate has an effect of reducing the lending rate so as to lower the rate of spending. The central aims to achieve this by discouraging borrowers from getting expensive loans. As the individuals and businesses borrow fewer funds f rom the financial institutions, the money in circulation