IFYEC003 Economics

THE NCUK INTERNATIONAL FOUNDATION YEAR

IFYEC003 Economics

Coursework

Semester 2

INFORMATION FOR STUDENTS

• This coursework is a take-home assessment.

• Essay length: 1,250 – 1,500 words (not including appendices/bibliography)
• There are 100 marks in total.
• This coursework contributes 20% to your overall final mark for your IFY Economics.
• All references should be acknowledged using the Harvard referencing system.

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 IFYEC003 Economics

Background

Inflationary pressures are broadening out beyond the food and energy sectors almost
everywhere, with businesses throughout the economy passing on higher energy,
transportation and labour costs by raising prices. (OECD 2022)

With the global economic cycle turning downwards and monetary tightening by most of
the major central banks increasingly taking effect, headline inflation is projected to peak
in the current quarter in most major economies, and to decline in the fourth quarter and
throughout 2023 in most G20 countries. (OECD 2022)

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the
2% inflation target, and in a way that helps to sustain growth and employment. At its
meeting ending on 21 September 2022, the MPC voted to increase Bank Rate by 0.5
percentage points, to 2.25%. (BoE, 2022)

Raising interest rates makes borrowing more expensive and - it is hoped - this can
encourage people to save more. As a result, they will buy fewer things and prices will stop
rising as fast. But when inflation is caused by things like rising energy prices worldwide,
there is a limit as to how effective UK interest rate rises can be in slowing inflation. (BBC,
2022)

Sources

OECD (2022) OECD Economic Outlook, Interim Report September 2022: Paying
the Price of War [online]. Available at: https://www.oecd-
ilibrary.org/sites/ae8c39ec-en/index.html?itemId=/content/publication/ae8c39ec-
en#section-d1e624 [accessed 17/10/2022]

BoE (2022) Bank Rate increased to 2.25% - September 2022, Monetary Policy Summary
and Minutes of the Monetary Policy Committee meeting [online]. Available at:
https://www.bankofengland.co.uk/monetary-policy-summary-and-
minutes/2022/september-2022 [accessed 17/10/2022]

BBC (2022) What is the UK inflation rate and why is the cost of living rising? [online].
Available at: https://www.bbc.co.uk/news/business-12196322 [accessed 17/10/2022]

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 IFYEC003 Economics

Coursework Title

Explain the meaning of inflation and why it is considered to be an important objective for
government. Apply relevant economic analysis to evaluate whether monetary policy is the
best method that can be used by the central bank to reduce inflation.

(100 marks)

To access the full mark range, you should be able to

• demonstrate clear knowledge and understanding of inflation and economic

policies to reduce this including monetary policy
• clearly apply relevant economic concepts, theories and models surrounding
inflation and the use of monetary policy in reducing its impact on an economy.
You may wish to consider the experience of different advanced economies around
the world to provide some structure and context to your answer. You may wish to
consider the impact that rising inflation might have on different aspects of the
macroeconomy and different economic agents.
• provide relevant and precise economic analysis of the benefits and costs of
monetary policy, and other measures in reducing inflation. You may wish to
consider the impact that monetary policy and alternative policy measures have on
other macroeconomic objectives.
• provide evaluative judgements on whether monetary policy is the best method
of reducing inflation, or if other policy measures will be more effective.

An initial list of suggested sources:

You can look at the three sources listed above in the context of the essay title to see from
where the information was derived.

Smith, P. (2019) OCR A Level Economics, 4th Ed. Hodder Education, London.
Chapter 2 5 & C h a p t e r 3 1 a r e most r e l e v a n t but also Chapter 30 & 32 gives you
some ideas of governmentintervention in general and problems of government
intervention

Goodman, D. and Aldrick P. (2022) BOE’s Chief Economist Says UK Fiscal News Needs
Significant Policy Response [online]. Available at:
https://www.bloomberg.com/news/articles/2022-09-27/boe-s-pill-says-uk-fiscal-news-
needs-significant-policy-response [accessed 24/10/2022]

The Guardian (2022) Austerity could be more difficult this time round, says Lord King
[online]. Available at: https://www.theguardian.com/politics/2022/oct/23/austerity-more-
difficult-this-time-round-lord-king-bank-england [accessed 24/10/2022]

Trading Economics (2022) United Kingdom Inflation Rate [online]. Available at:
https://tradingeconomics.com/united-kingdom/inflation-cpi [accessed 24/10/2022]

Williams, N. (2022) One small step for UK monetary policy, one giant leap for the MPC
[online]. Available at: https://www.omfif.org/2022/08/one-small-step-for-uk-monetary-
policy-one-giant-leap-for-the-mpc/ [accessed 24/10/2022]

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