Role of Central Banks Essay Example | Topics and Well Written Essays - 2750 words

Role of Central Banks - Essay Example Low inflation is not an end in itself. It is however an important factor in helping to encourage long-term stability in the economy. Price stability is a precondition for achieving a wider economic goal of sustainable growth and employment. High inflation can be damaging to the functioning of the economy. Low inflation can help to foster sustainable long-term economic growth 2. The central bank ensures that the money supply in the economy is exogenous and determines the monetary base accordingly for the actual values of the currency and reserve ratios etc. using the appropriate money supply formula. 3. The money supply is endogenous to the economy but is determined by the central bank according to a money supply rule, and the monetary base is changed to achieve the money supply determined according to this rule. The last assumption given above is the most commonly used operational technique, even where the central bank's intention is to focus on the monetary base or the money supply as the main determinant of aggregate demand. Under this procedure, the central bank sets the discount rate to achieve a certain level of aggregate demand in the economy and lets the financial sector determine the monetary base through borrowing or discounting bonds with it. ... rational technique, even where the central bank's intention is to focus on the monetary base or the money supply as the main determinant of aggregate demand. Under this procedure, the central bank sets the discount rate to achieve a certain level of aggregate demand in the economy and lets the financial sector determine the monetary base through borrowing or discounting bonds with it. In any case, the central bank's behaviour is captured through the specification of the monetary base, no matter which of the above procedures is used. The measures that are taken by a central bank typically involve altering the interest rate in order to control the rate of growth of aggregate demand, the money supply and ultimately price inflation. It also involves changing the exchange rates as fluctuations in the value of currency also have an impact on macroeconomic activity. All in all, these measures come under the banner of monetary policy of a country. The key result is that monetary policy governed by society's preferences produces an inefficient outcome featuring an undesired, high level of price instability. Society can improve on this suboptimal outcome in a number of ways. One way to achieve price stability without distorting the stabilization of shocks is to set new incentives for the central bank by picking a progressive central bank which cares a lot about income, making it independent of the government, and adding an inflation target to its environment.1 Monetary Policy Many economists believe that monetary policy is a more powerful tool than fiscal policy in controlling inflation. The circular flow of income and spending is kept in motion through changes in short term interest rates that in turn affect the spending and savings patterns of households and businesses

Management Assignment(LAW) Essay Example | Topics and Well Written Essays - 1000 words

Management Assignment(LAW) - Essay Example Charles Fried stated that persons entering into a contract are morally bound to keep it.*4 Therefore, a contract is equivalent to a written promise to deliver a service or goods in exchange for some consideration and fairness in transactions is the goal sought to be achieved in contract law. Traditional notions of laissez faire have been eschewed in modern contract law. In interpreting contracts and determining their validity, the courts have demonstrated that it is not the meaning a person actually intended to convey but what a reasonable person would have construed it as, which is referred to as the process of â€Å"objective interpretation.*5 In order that a contract be deemed valid, the parties to the contract must be clearly specified and the terms upon which the parties agree to conduct business must also be clearly laid out. In the case of Intel’s suppliers, the contract would therefore exist between Intel and the suppliers, since the engineers are in effect, acting on behalf of Intel and not as independent agents. This would however qualify as a bilateral contract since it involves the two parties: Intel via its engineers and the suppliers. In purchasing their supplies, the engineers functioning as Intel’s agents will be deemed to have made an offer for purchase of goods*6, which will not however be enforceable unless the suppliers have agreed and indicated their agreement through a written contract. An offer which is not communicated to the offerree will be deemed to be invalid or ineffective.*7 Therefore, assuming that Intel’s engineers have communicated their offer to the suppliers and there is a counter proposal made by the supplier in regard to the purchase price of the goods, this will be deemed to negate the original offer.*8 It is then up to the offerer to either agree with the counter proposal and indicate