MACROECONOMIC ENVIRONMENT OF BUSINESS

Macroeconomic Environment of Business

Macroeconomic Environment of Business

Inflation

When the Bank of England changes the official interest rate it is attempting to influence the overall level of expenditure in the economy. When the amount of money spent grows more quickly than the volume of output produced, inflation is the result. In this way, changes in interest rates are used to control inflation. (Kaufman, Krueger, Hunter 1999:123)

The Bank of England sets an interest rate at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy. (Hausmann, Velasco 2004: 12) Changes in spending feed through into output and, in turn, into employment. That can affect wage costs by changing the relative balance of demand and supply for workers. But it also influences wage bargainers' expectations of inflation - an important consideration for the eventual settlement. The impact on output and wages feeds through to producers' costs and prices, and eventually consumer prices.

Substantial Increases In Expenditure On Secondary Education

The Bank offers a range of resources and services to build awareness and understanding of its role and functions, and of central banking more generally. For the public, there is a large range of material on why inflation matters, Museum presentations and displays for all ages and a public enquiry service.

For young people, there is material on money, prices and the economy, including an annual competition for secondary school students. For other central bankers, the Bank's Centre for Central Banking Studies conducts seminars and provides expert advice to monetary institutions throughout the world(Haldane 2004:14).

the Government published an exchange of letters between the Chancellor of the Exchequer and the Governor of the Bank of England. The Remit for the Monetary Policy Committee (MPC) requires the Governor to write to the Chancellor if inflation deviates from the 2 per cent target by more than one percentage point. On 15 February 2010, the Governor wrote to the Chancellor explaining the reasons why CPI inflation for January 2010 moved away from the target, the policy action being taken to deal with it, and the period within which the MPC expects inflation to return to target. The Chancellor replied on 16 February 2010.

UK Economy of a Decision by the Bank of England's Monetary Policy Committee to Increase Interest Rates

As banker to the Government and the banks, the Bank is able to forecast fairly accurately the pattern of money flows between the Government's accounts on one hand and the commercial banks on the other, and acts on a daily basis to smooth out the imbalances which arise. When more money flows from the banks to the Government than vice versa, the banks' holdings of liquid assets are ...