Economics Essay Shady mostafa
The inflation rate and economic growth are vital to any economy in the world, achieving good numbers in both of them could be the key in order for a country to build a sustainable economy that could develop to new heights. The two countries that I’m going to be talking about today are Morocco and the UK, even though it is very difficult to draw comparisons between them due to the massive economic difference, both economies still have their own weaknesses and strengths.
The UK is regarded as a very strong economy worldwide and it stands 8th in the highest GDP figures with an outstanding 2,181 trillion dollars GDP at PPP. One of the UKs main ...view middle of the document...
Quantitative easing increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity(investopedia). Quantitative easing doesn’t seem to be doing instant wonders to the UKs economy because even though the growth rate increased slightly to 0.9% within this year it has fallen back down to 0.3%. The major risk of quantitative easing is that although more money is floating around, there is still a fixed amount of goods for sale and this will eventually lead to higher prices or inflation(investopedia) however patience could be what’s needed for this process to flourish.
Inflation is something the UK has always rated highly and it is something which I consider as the focal point to the UKs economy. Inflation affects many other things in an economy such as unemployment as businesses will be in a position to increase wages due to worker needs in midst of an increase of the level of prices which will then force the businesses to increase the prices of their own products and that will lead to a decrease in the demand of their products and will force the business to cut down their costs by probably making some workers redundant. Inflation could be caused from demand pull inflation which is when prices rise due to the high amount of demand on them, another reason for inflation is cost push inflation which is when prices are pushed up by increases in the costs of production so for example things such as raw materials.
The bank of England are targeting an inflation rate of 2% however they are yet to reach that target in a more stable matter with rates increasing above 2% numerous times and as of currently it stands at 2.7%. The things that might have had a negative impact towards the inflation rate of the UK lately are the tuition fees and the food prices which have gone up as well as the increase of demand on products which could have led to an increase of prices. Another thing that may have affected the inflation rate is the quantitative easing as I have mentioned before. The UK put a lot of effort in stabilizing the inflation in an acceptable rate as they understand that inflation could end up harming the economic growth of their country and that would be devastating as the economic growth stands at a very low number already which is 0.5%.
Morocco is a developing country that is growing at a very impressive pace at the moment with their growth rate standing at 4.0 % and a GDP number that stands behind only 4 countries in Africa and the major contributors to this growing success are tourism, telecoms and textiles. Morocco is also the world’s 3rd largest producer of phosphorous and that of course does a world of good in terms of exports however even though Morocco’s growth rate seems to be on the right track there are still things they should be looking to improve at that could help spearhead their growth rate even more which will definitely help them catch up with...