英国课程作业范文.docVIP

英国课程作业范文 Literature review: 1. Introduction: The interaction between stock returns, inflation and monetary policy is an area that has interested monetary and financial economists for a long time. My project will focus on how inflation and interest rate impact on stock market. And this literature review will go back over different opinions on the relationship between stock returns, inflation and interest rates and attempt to find out what and why they have such complicated relationship. 2. Definition of inflation: Inflation is a common phenomenon that the prices of goods and services are increasing, whereas the value of pounds is decreasing. Retail price index (RPI) and consumer price index (CPI) both are basic approaches to measure the rate of inflation in the England. Nellis.J GParker.D, (2004) 3. Causes of inflation: There are two major causes for the occurrence of inflation. The first cause is the so-called demand-pull force and the other is called cost-push force. ‘Demand-pull inflation occurs when the aggregate demand increasing however aggregate supply fails to match it, forcing price increases and pulling up wages, materials, and operating and financing costs. Cost-push inflation occurs when prices rise to cover total expenses and preserve profit margins’. (The official CIMA learning system, CIMA business) 4. Policies deal with inflation: Three primarily policies are introduced to deal with different causes of inflation: 1. Monetary Policy: the monetary policy focus on the changes of interest rates to control inflation. The central bank of England sets a central inflation target, when the inflation rate fluctuate more than 1% around 2%, the interest rates will be changed to balance it. 2. Fiscal Policy: the government prefers to reduce The Assignment is provided by UK Assignment it is expenditures to less budget deficit or increase it is income by increase tax revenue to erode inflation. 3. “Prices and incomes Policy: prices and incomes policies tackle