Introduction
Economic policies are aimed at finding satisfactory solutions to various problems that emerge from time to time in any economic system. In most instances, the so called problems present themselves in the form of inflation, unsatisfactory or poor economic growth and unemployment. It is not always simple and straight forward to solve such dilemmas, especially because their impact, implications and importance changes from time to time. (Roux, 2008).
Making use of the monetary policy and the fiscal policy, the South African government has made efforts to address growth and poverty in the country. The National Development Plan (NDP) and the National Growth Plan (NGP) are two strategies that have been designed by the government as vehicles to address the problems that South Africa faces.
What is the Fiscal policy?
‘Fiscal policy’ is the name given to government policies which seek to influence government revenue (taxation) and government expenditure (Griffiths & Wall, 2005, p. 370). Increasing or decreasing tax or government income will have an impact on the national income. When the equilibrium national income level changes, output (supply) also changes. Employment as well as inflation will be directly affected. When there is less activity in the market, the result is an increase in unemployment. In such a case the government must use and expansionary fiscal approach to counter this. Government spending and the reduction of taxes will mean that there is more money circulating in the economy and the implications of borrowing money will have been reduced. This translates into households willing to spend money, and businesses willing to borrow money to increase output.
In a bid to increase growth and reduce the level o...
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...yment will not come from big business, but as a result of entrepreneurial activity in the small and medium enterprise sector” (Laubscher, n.d.) The state needs the private sector to join in the party. The private sector will provide jobs that require skilled workers, and private schools will be required to play an integral part in producing such workers. The early child development in terms of nutrition and education will still rely heavily on no government establishments contributing to the welfare of young, future contributors to the economy.
It is clear that the NGP is inconsistent in making it seem as though the state can achieve its goals in isolation.
The South African economy cannot control what happens on the international markets so the NDP must be mindful not to place too much reliance on imports, lest the same fate as GEAR befalls the government again.
How can monetary policy and fiscal policy greatly influence the US economy? Keynesian economics says, “A depressed economy is the result of inadequate spending .” According to Keynesian the government intervention can help a depressed economy through monetary policy and fiscal .The idea established by Keynes was that managing the economy is a government responsibility . Monetary policy uses changes in the quantity of money to alter interest rates, which in turn affect the level of overall spending
Mr. Emanuel, in the current economic climate, the Obama administration’s course of action has been to pursue aggressive countercyclical fiscal policies designed to prevent further economic deterioration. Critics of these policies argue that: 1. The current fiscal stimulus is ineffective and has done little to create new jobs at a significant cost. 2. Monetary policy is a more effective lever to reduce unemployment and smooth the business cycle, due to its shorter implementation lag and ability
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