Research Proposal: Inflation, Monetary Policy, and AI Applications

This research proposal explores the multifaceted aspects of inflation, monetary policy, and the integration of artificial intelligence within the economic framework. The proposal initiates with a definition of inflation, its causes, and its impacts on the economy, including a discussion of the UK government's inflation target. It analyzes monetary and fiscal policies, wage controls, monetarism, and supply-side policies as methods to mitigate inflation. The assignment further delves into cost analysis, calculating the cost of debt and equity. It also examines the role of AI in the legal industry, assessing its benefits and limitations. Finally, it provides insights into employee motivation through incentive programs. The assignment draws on various economic theories and concepts, supported by references to relevant books and journals.

Research proposal

QUESTION 1
A
Inflation can be defined as the rise in the overall prices of goods as well as services of the daily
products. This can include food, housing, clothing, transport etc. It measures the overall average
change in the price. Inflation is when the overall purchasing power of a unit of currency goes
down. There are various causes of inflation like a demand-pull inflation and cost-push inflation.
When there is inflation, buyers want the products so, they are willing to pay even high prices for
the products. On the other hand, in a cost-push inflation, the supply of the products gets
restricted, but the demand still remains the same. There can be advantages as well as
disadvantages of inflation. The disadvantages can include lower investment and an uncertainty.
Inflation is defined as the quantitative measure which is known as the rate at which average price
level of the goods and products within economy is increased over time. There is need of
developing good efficiency of the quantitative analysis so that unit of currency is expressed.
This is defined as the rate at which the general price of goods and products is increasing. This
leads to falling of the purchasing power. This is classified into three types – demand pull
inflation, cost push inflation and built in inflation. There are tangible resources which are
involved in the working of company.
(b) The rationale for UK government setting the inflation target at 2%?
The government has set us an inflation target of 2 per cent to keep inflation low and
stable. That tends to help to prepare for the future to everybody. If inflation is high or if it tries to
move across a lot, it is difficult for companies to determine the new prices to prepare their
expenditure. But if inflation is too lower, or pessimistic, some individuals may place off
expenditure because they expect falling prices. Despite the fact that lower prices sound like a
positive thing, if everyone cut their expenditure then firms could struggle and people can lose
their jobs.
(c) Impact that increased inflation rate has on economy?
The first inflationary impact is just yet another form of saying what it is. Inflation is a fall in
currency 's buying ability owing to a rising in inflation from across economy. Another impact is
that due to higher inflation this may lead to encourage to people to do more investing and
spending.
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D
Monetary Policy
In a time of quick financial development, request in the economy could be becoming
quicker than its ability to meet it. This prompts inflationary weights as firms react to deficiencies
by setting up the cost. We can term this interest pull swelling. In this manner, decreasing the
development of total interest (AD) ought to lessen inflationary weights.
The Central bank could expand loan costs. Higher rates make obtaining more costly and
sparing more appealing. This should prompt lower development in purchaser spending and
speculation. See more on higher loan costs
Fiscal Policy
The legislature can increment charges, (for example, personal expense and VAT) and cut
spending. This improves the administration's spending circumstance and assists with diminishing
interest in the economy.
Both these strategies diminish swelling by lessening the development of total interest. On
the off chance that monetary development is quick, lessening the development of AD can
diminish inflationary weights without causing a downturn.
Compensation Control
In the event that expansion is brought about by wage swelling (for example ground-
breaking associations anticipating higher genuine wages), at that point constraining
compensation development can assist with directing swelling. Lower wage development assists
with diminishing cost-push swelling and assists with directing interest pull expansion.
Notwithstanding, as the UK found during the 1970s, it tends to be hard to control
swelling through livelihoods approaches, particularly if the associations are incredible.
Monetarism
Monetarism tries to control expansion by controlling the cash flexibly. Monetarists accept
there is a solid connection between the cash flexibly and expansion. On the off chance that you
can control the development of the cash gracefully, at that point you ought to have the option to
manage swelling. Monetarists would pressure strategies, for example,
 Higher loan costs (fixing money related approach)
 Decreasing spending shortage (deflationary monetary strategy)
 Control of cash being made by the legislature
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 Nonetheless, by and by, the connection between cash flexibly and swelling is less solid.
Supply Side Policies
Regularly expansion is brought about by tenacious uncompetitiveness and increasing
expenses. Flexibly side approaches may empower the economy to turn out to be more serious
and help to direct inflationary weights. For instance, more adaptable work markets may help
diminish inflationary weight.
Be that as it may, gracefully side approaches can take quite a while, and can't manage
expansion brought about by rising interest.
Approaches to Reduce Hyperinflation – change cash
In a time of hyperinflation, customary arrangements might be unacceptable. Desires for
future expansion might be difficult to change. At the point when individuals have lost trust in a
money, it might be important to present another cash or utilize another like the dollar (for
example Zimbabwe hyperinflation).
Approaches to lessen Cost-Push Inflation
Cost-push swelling (for example rising oil costs can prompt swelling and lower
development. This is the most noticeably terrible of the two universes and is more hard to control
without prompting lower development.
QUESTION 2
a)
 Cost of Debt = $16,000(1-30%)
 Cost of Debt = $16000(0.7)
 Cost of Debt = $11,200
Cost of debt of the company is $11,200.
Cost of equity = Risk free rate of return + Premium expected for risk
Cost of equity = Risk free rate of return + Beta × (market rate of return – risk free rate of return)
 Cost of Equity Formula= (3.20/20) + 1.31%
 Cost of Equity Formula= 17.31%
 Hence, the cost of equity for the XYZ company will be 17.31%.
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QUESTION 3
(a)
Artificial intelligence is a technology in which technology is used to undertake various tasks with
help of virtual and digital assistance. Such technology can result in high power for legal industry
but as the threats in this industry are continuously increasing it can be seen that cybercrimes are
increasing which can be a threat to future survival of law firms.
By analysing the benefits and limitations of artificial intelligence, it can be seen that this
technology is an opportunity rather than being a threat as this technology will help the authorities
and personnel to gain data oriented facts based on a case.
(b)
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An easy way to encourage employees can be providing them incentives for perfect attendance.
There are a number of options that can be used by employer to provide various benefits. Such as
$150 for one month., $350 for three months and so on. This will encourage employees to attend
their work regularly. It will ultimately result in improving the productivity of company as well.
This can also add a benefit for employee if they do not miss work all month. It can also convert
the benefits to employees as promotion.
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REFERENCES
Books and Journals
Economics, G., 2019. Grazing Economics.
Ferber, M.A. and Nelson, J.A. eds., 2020. Feminist economics today: Beyond economic man.
University of Chicago Press.
Goldfarb, A. and Tucker, C., 2019. Digital economics. Journal of Economic Literature, 57(1),
pp.3-43.
Gollier, C., 2018. The economics of risk and uncertainty. Edward Elgar Publishing Limited.
Kaldor, N., 2020. Economics without equilibrium. Routledge.
Lewis, L. and Tietenberg, T.H., 2019. Environmental economics and policy. Routledge.
McConnell, C., Brue, S. and Macpherson, D., 2016. Contemporary labor economics. McGraw-
Hill Education.
Parker, S.C., 2018. The economics of entrepreneurship. Cambridge University Press.
Persson, T. and Tabellini, G., 2016. Political economics. Cambridge, MA: MIT press.
Redding, S.J. and Rossi-Hansberg, E., 2017. Quantitative spatial economics. Annual Review of
Economics, 9, pp.21-58.
Shiller, R.J., 2017. Narrative economics. American Economic Review, 107(4), pp.967-1004.
Thaler, R.H., 2017. Behavioral economics. Journal of Political Economy, 125(6), pp.1799-1805.
Tietenberg, T.H. and Lewis, L., 2018. Environmental and natural resource economics.
Routledge.
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