EconomicsWithAneesh

"Think of a recent decision that you needed to make. Discuss how insights and tools from economic theory and analysis might have been helpful in making the decision." [Essay Competition-    awarded a certificate of commendation and a trip to Cambridge ] Sitting with my family at our favorite restaurant, I was confronted with a menu and faced with what seemed like a simple task: choosing what to eat. As I scanned through the options, I quickly realised this was anything but easy; with so many choices and limited time, I found myself applying economics to make the best decision I could. When choosing a drink from the menu, I understood how several principles of behavioral economics had been implemented, and I was not to be fooled! I immediately noticed price anchoring was being used; the presence of a higher price option which acts as an anchor, making the other drinks seem relatively cheaper. If I originally thought £2.50 was expensive for a soft drink, seeing £20.00 at the st...

How does monetary policy work? Explain how monetary decisions affect main macroeconomic outcomes such as the nominal GDP and inflation? [Essay Competition] Monetary policy is used by central banks to try to achieve macroeconomic outcomes: stable and sustainable economic growth, levels of inflation around 2%, low rates of unemployment and equilibrium on the balance of payments of a nation. Founded in 1694, the UK’s central bank, the Bank of England, through regulating the supply of money and interest rates, aims to achieve the former objectives. There are two types of monetary policy: expansionary, which is used to stimulate economic growth, and contractionary, which is used to reduce inflation and stabilise the economy. My essay shall initially explore what the macroeconomic outcomes are, explain how monetary policy operates and then will proceed to connect both points together. Economic growth is arguably the most important macroeconomic outcome, as it drives improvements in living st...