Macroeconomic Policy

854 Words2 Pages

The main components of macroeconomic policy are monetary and fiscal policy. The main aims of macroeconomic policy are continued economic growth, high employment, stable prices (low inflation), an elevation in average living standards, and a maintainable stance on the balance of payments (Macroeconomics). Practically all governments apply macroeconomic policies to reach policy goals and to improve the workings of the economy. Economic growth is important for reducing poverty levels. Continued growth means the ability to meet the needs of the current generation without burdening future generations with debt (Macroeconomics). Low inflation rates are important because high inflation rates can damage the international competitiveness of a country’s commodities. Balance of payments refers to reducing deficits so that they do not create an unstable economy. Macroeconomic policy can also be concerned with redistributing income and thus, shrinking the income gap between the rich and the poor.

Monetary policies can be referred to as demand-side macroeconomic policies. They operate by promoting or restraining spending on goods and services. Economy-wide recessions and booms reflect rises and falls in collective demand instead of in the economy’s productive capacity. Monetary policy attempts to reduce, or remove these variations (Pechman). It utilizes modifications in the money supply to alter interest rates and accelerate economic activity. Two types of monetary policy are expansionary and contractionary. When the Federal Reserve increases money supply, the policy is expansionary. When the Federal Reserve decreases money supply, the policy is contractionary (Sparknotes). Under expansionary monetary policy, the economy grows a...

... middle of paper ...

...nment Macroeconomic Policy." Tutor2u | Economics | Business Studies | Politics | Sociology | History | Law | Marketing | Accounting | Business Strategy. Web. 22 Oct. 2011. .

Mankiw, Greg. "Four Goals of Tax Policy." Greg Mankiw's Blog. Web. 22 Oct. 2011. .

Pechman, Joseph A. Federal Tax Policy. Washington: Brookings Institution, 1971. Print.

"SparkNotes: Tax and Fiscal Policy: Monetary Policy." SparkNotes: Today's Most Popular Study Guides. Web. 21 Oct. 2011. .

Weil, David N. "Fiscal Policy: The Concise Encyclopedia of Economics." Library of Economics and Liberty. Web. 21 Oct. 2011. .

Show More
Related

  • The U.S. Free-Enterprise Economy

    788 Words  | 2 Pages

    Monetary Policy is another policy used in Keynesianism which is a list of protocols designed to regulate the economy by setting the amount of money that is in circulation and controlled interest levels. The Federal Reserve system, also known as the central banking system in the U.S., which holds control of this policy. Monetary policy has three tools used by the Federal Reserve to enforce this policy. Reserve Requirement is the first tool that determines the lowest amount of money a bank must possess and is not able to lend out. The second way to enforce monetary policy is by using the discount rate or the interest rate a bank will charge.

    Read More

  • The Federal Reserve and Macroeconomic Factors

    1460 Words  | 3 Pages

    The Federal Reserve and Macroeconomic Factors Introduction The Federal Reserve controls the economy of the United States through a variety of tools. They use these tools to shape the monetary policy of the United States in order to promote economic growth and reduce the rate of inflation and the unemployment rate. By adjusting these tools, the Fed is able to control the amount of money in the supply. By controlling the amount of money, the Fed can affect the macro-economic indicators and steer the economy away from runaway inflation or a recession.

    Read More

  • Tax Reformation Common Ground

    1090 Words  | 3 Pages

    Henchman, Joseph. "Income Tax Reform." Journal Of State Taxation 31.1 (2012): 33-34. Business Source Premier. Web. 19 Jan. 2014.

    Read More

  • The Knights of Labor

    1316 Words  | 3 Pages

    21st Century Economics (Vol. 1, pp. 58-59. 163-172. Thousand Oaks, CA: Sage Reference.

    Read More

  • What´s Macro Policy: The Adaptive Expectations Theory

    1501 Words  | 4 Pages

    A theme that dominates modern discussions of macro policy is the importance of expectations, and economists have devoted a great deal of thought to expectations and the economy. Change in expectations can shift the aggregate demand (AD) curve; expectations of inflation can cause inflation. For this reason expectations are central to all policy discussions, and what people believe policy will be significantly influences the effectiveness of the policy.

    Read More

  • Weimar Hyperinflation

    2077 Words  | 5 Pages

    Kroon, George E. Macroeconomics The Easy Way. New York: Barron’s Educational Series, Inc., 2007. Print.

    Read More

  • Food Insecurity and the Low Income Family

    1476 Words  | 3 Pages

    25 Nov. 2013. “Economy.” CQ Researcher. 15 June 2013. Web.

    Read More

  • Monetary Policy

    1670 Words  | 4 Pages

    In the study of macroeconomics there are several sub factors that affect the economy either favorably or adversely. One dynamic of macroeconomics is monetary policy. Monetary policy consists of deliberate changes in the money supply to influence interest rates and thus the level of spending in the economy. “The goal of a monetary policy is to achieve and maintain price level stability, full employment and economic growth.” (McConnell & Brue, 2004).

    Read More

  • Monetary and Fiscal Policy

    1405 Words  | 3 Pages

    Monetary policy is the mechanism of a country’s monetary authority (usually the central bank) taking up measures to regulate the supply of money and the rates of interest. It involves controlling money in the economy to promote economic growth and stability by creating relatively stable prices and low unemployment. A monetary policy mainly deals with the supply of money, availability of money, cost of money and the rate of interest to attain a set of objectives aiming towards growth and stability of the economy. Here are some of the monetary policy tools:

    Read More

  • Current Monetary Policy Of The United States

    2057 Words  | 5 Pages

    United States Federal Reserve. (February 11, 2014). Monetary Policy Report. Retrieved June 18, 2014, from http://www.federalreserve.gov/monetarypolicy/mpr_20140211_summary.htm

    Read More

  • Federal Reserve System Case Study

    740 Words  | 2 Pages

    According to federalreserveeducation.org, the term "monetary policy" refers to what the Federal Reserve, the nation 's central bank, does to influence the amount of money and credit in the U.S. economy, (n d). The tools used are diverse but the main ones are:

    Read More

  • Difficulties in Formulating Macroeconomic Policy

    1999 Words  | 4 Pages

    Difficulties in Formulating Macroeconomic Policy Policy makers try to influence the behaviour of broad economic aggregates in order to improve the performance of the economy. The main macroeconomic objectives of policy are: a high and relatively stable level of employment; a stable general price level; a growing level of real income (economic growth); balance of payments equilibrium, and certain distributional aims. This essay will go through what these difficulties are and examine how these difficulties affect the policy maker when they attempt to formulate macroeconomic policy. It is difficult to provide a single decisive factor for policy evaluation as a change in political and/or economic circumstances may result in declared objectives being changed or reversed. Economists can give advice on the feasibility and desirability of policies designed to attain the ultimate targets, however, the ultimate responsibility lies with the policy maker.

    Read More

  • The Role of the Government in the Economy

    848 Words  | 2 Pages

    The appropriate role of government in the economy consists of six major functions of interventions in the markets economy. Governments provide the legal and social framework, maintain competition, provide public goods and services, national defense, income and social welfare, correct for externalities, and stabilize the economy. The government also provides polices that help support the functioning of markets and policies to correct situations when the market fails. As well as, guiding the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By applying the fiscal policy which adjusts spending and tax rates or monetary policy which manage the money supply and control the use of credit, it can slow down or speed up the economy's rate of growth in the process, affecting the level of prices and employment to increase or decrease.

    Read More

  • Economics of the Automobile Industry

    2412 Words  | 5 Pages

    The Social Studies Help Center (n.d.). Monetary and Fiscal Policy. Retrieved November 5, 2011, from http://www.socialstudieshelp.com/eco_mon_and_fiscal.htm

    Read More

  • Macroeconomic Objectives Essay

    1754 Words  | 4 Pages

    These two policies use to try to shorten recessions. Fiscal policy has its initial impact in the goods markets, then monetary policy has its initial impact mainly in the assets markets, which both effect on both level of output and interest rates. (R. Dornbusch et al., 2008)

    Read More

More about Macroeconomic Policy

Open Document