7. In the Financial Times article "UK businesses expect prices to soar in the coming year"(3 March 2022) we can read:"British businesses expect inflation to rise at its fastest pace for five years, according to aBank of England survey, [..]the Bank of England have often quoted high business inflation expectations [...] in recentmonths to support the need for further monetary policy tightening."(a) Explain why the central bank considers business experdecisions on monetary policy.ations when making(b) In February 2022, inflation in the UK was expected to increase to close to 6% inFebruary and March, before peaking at around 7 %% in April. Despite this, theMonetary Policy Committee in the Bank of England increase the policy rate to 0.25%to 0.5%, even if some members recommended an increase to 0.75%.Using the 3-equation model, depict the UK economy in February 2022, and providesome reasons why the Bank of England did not increase the interest rate to 0.75%(or higher).

Macroeconomic forecasting will continue to be important since it dictates the speed and length of…

7. In the Financial Times article "UK businesses expect prices to soar in the coming year" (3 March 2022) we can read: "British businesses expect inflation to rise at its fastest pace for five years, according to a Bank of England survey, [...] the Bank of England have often quoted high business inflation expectations [...] in recent months to support the need for further monetary policy tightening." (a) Explain why the central bank considers business expectations when making decisions on monetary policy. (b) In February 2022, inflation in the UK was expected to increase to close to 6% in February and March, before peaking at around 7 %4% in April. Despite this, the Monetary Policy Committee in the Bank of England increase the policy rate to 0.25% to 0.5%, even if some members recommended an increase to 0.75%. Using the 3-equation model, depict the UK economy in February 2022, and provide some reasons why the Bank of England did not increase the interest rate to 0.75% (or higher).

7. In the Financial Times article "UK businesses expect prices to soar in the coming year" (3 March 2022) we can read: "British businesses expect inflation to rise at its fastest pace for five years, according to a Bank of England survey, [...] the Bank of England have often quoted high business inflation expectations [...] in recent months to support the need for further monetary policy tightening." (a) Explain why the central bank considers business expectations when making decisions on monetary policy. (b) In February 2022, inflation in the UK was expected to increase to close to 6% in February and March, before peaking at around 7 %4% in April. Despite this, the Monetary Policy Committee in the Bank of England increase the policy rate to 0.25% to 0.5%, even if some members recommended an increase to 0.75%. Using the 3-equation model, depict the UK economy in February 2022, and provide some reasons why the Bank of England did not increase the interest rate to 0.75% (or higher).

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter35: The Short-Run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 5PA

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In the Financial Times article “UK businesses expect prices to soar in the coming year” (3 March 2022) we can read: “British businesses expect inflation to rise at its fastest pace for five years, according to a Bank of England survey, […] the Bank of England has often quoted high business inflation expectations […] in recent months to support the need for further monetary policy tightening.” (a) Explain why the central bank considers business expectations when making decisions on monetary policy. (100 words) (b) In February 2022, inflation in the UK was expected to increase to close to 6% in February and March, before peaking at around 7 ¼% in April. Despite this, the Monetary Policy Committee in the Bank of England increase the policy rate to 0.25% to 0.5%, even if some members recommended an increase to 0.75%. Using the 3-equation model, depict the UK economy in February 2022, and provide some reasons why the Bank of England did not increase the interest rate to 0.75% (or higher).…
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