Introductory Economics (Macroeconomics) Essay Example | Topics and Well Written Essays - 1750 words

Introductory Economics (Macroeconomics) - Essay causeIf interest rates are forecasted to be low in an economy, then it makes productive investors believe that in the long run, cost of borrowing funds would be less. Under much(prenominal) circumstances, the rate of investments made in an economy would ontogenesis and level of economic productivity would also rise. Finally, a rise in the internal product of a nation simply indicates a fall in unemployment rates. The Bank of England initially claimed below the regime of Forward Guidance Policy that it would not increase the lending interest rate to a higher place .5% in the long run, until the unemployment level in the country falls to 7% or below (BBC, 2014). Accordingly, such claims made by the Bank had succeeded in lowering the level of volatility in the market as well as enhancing the level of investments made in the country (BBC, 2014).Nonetheless, governor of the bank had mentioned that it was required to rewrite the Forwar d Guidance Policy because such forecasts would generate excessive job opportunities in the nation, that would automatically increase the amount of money and hence, demand in the economy ultimately carving the path of inflation in the long run (Howker and Malik, 2010). The Bank also claimed that in its revised Forward Guidance Policy, it would forecast several(prenominal) macroeconomic factors, apart from unemployment and interest rate. The bank asserted that it would increase the interest rate to 2% to change the unusual growth of employments in the nation. Although Mark Carney claimed that the country would experience high growth from 2.8% to 3.4% in the young years, he also added that the growth was neither balanced nor sustainable and way below the pre-financial crisis levels (BBC, 2014). With reference to such revised estimates for future, the risk adverse attitude of investors in the nation would fall to some extent. They would realize that they had overestimated constancy o f the economy