Macroeconomic Policies And Its Effects On The Economy Essay

Course Description Principles of Macroeconomics deals with consumers as a whole, producers as a whole, the effects of government spending and taxation policies, and the effects of the monetary policy carried out by the Federal Reserve Bank. Macroeconomics is concerned with unemployment, inflation, and the business cycle. Text Required: Macroeconomics, Roger A. Arnold, 7th Edition, 2005 Recommended: Macroeconomics Study Guide, Roger A. Arnold, 7th

Another form of macroeconomic policy is fiscal policy, which involves the use of the Commonwealth Government’s budget in order to achieve the Government economic objectives. By varying the amount of government spending and revenue, the government can effectively alter the level of economic activity, which in turn will influence economic growth, inflation, unemployment and the external indicators of the economy.

Deciding to start a business is brave and adventurous. The first step to success is a brilliant, viable, profitable idea. Whether you have decided to do it on your own because you are tired of working for someone else, or you are laid off after many years in your organization, before you decide to invest your life savings and get buried in debt, consider the big picture, the current economy, your demographic target consumer and do your research. The idea of solar energy is one such brilliant, viable idea. True the demand is present for such energy, but before taking the leap, consider the market saturation, competition, governmental rules and regulations and other determent factor that will influence the success of your

1. If an economy produces final output worth $5 trillion, then the amount of gross

The study and application of macroeconomics influences the well-being of a nation by achieving high rates of material production and by keeping track of how much of something is being consumed. The United States is one of the wealthiest countries in the globe, making the government powerful. Government intervention in the Untied States is an important factor that keeps the economy running. Enough power to control the business cycle keeps money circulating the nation. The business cycle includes economic downturns, classified as recessions, expansions, business-cycle peaks and troughs. A good government is essential for the economy to run smoothly. There are three main macroeconomic variables in the nation that the government focuses on, Gross Domestic Product (GDP), unemployment rate, and inflation rate.

The Great Recession lasted from December of 2007 until June of 2009, making it the longest recession since World War II. During this time, gross domestic product (GDP), inflation, unemployment, and interest rates were all greatly affected. The previously mentioned metrics are used to compare today’s economy to the economy during the Great Recession to see how the United States has rebounded since 2009. Monetary and fiscal policies were also implemented to combat the recession, and their effects determine whether or not the policies have a lasting effect in continuing to help the U.S. economy rebound.

Macroeconomics is the field of economics that studies the behavior of the economy as a whole not certain parts. Gross National Product (GDP) the economy’s total output; how it is affected by changes in unemployment, national income, rate of growth, and price levels. Macroeconomics encompasses an increase or a decrease in net exports would affect a nation 's capital account. Government’s role in macroeconomics is to keep the economy in equilibrium; taxes and government spending augment the balance to achieve equilibrium in the economy

The variation in an economic time-series which is caused by major expansions or contractions usually

Fiscal policy affects aggregate demand through changes in government spending and taxation. Government spending and taxation influence employment and household income, which dictate consumer spending and investment. Monetary policy impacts the money supply in an economy, which influences interest rates and the inflation rate. Monetary policy impacts business expansion, net exports, employment, the cost of debt and the relative cost of consumption versus saving.

Macroeconomic policies are used to maintain and smooth out the fluctuation of the business cycle to keep the growth rate constant. There are two types of macroeconomic policy, Fiscal and Monitary. Fiscal Policy is a macro policy that allows the Government to increase or decrease the amount of economic growth by either increasing or reducing the level of taxation and Government spending. The annual budget is an example of fiscal policy. Fiscal policy takes a long time to implement as it can only be changed every 12 months but goes into effect immediately.

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

Monetary policy is the national macroeconomic regulation and control of two basic policies. It’s mainly work by implementing expansionary policies to adjust the relationship between social total supply and total demand. They have emphasized particularly on, and closely linked. And it must handle the relationship accurately and correctly. According to the actual situation and using the monetary policy, coordinate and flexible, to give full play to its due role. The government should ensure sustained, rapid and healthy development of national economy. The country to adjust the social capital supply and demand should as far as possible to avoid administrative interference, and should use economic means to guide, when the monetary policy effect is not obvious, fiscal policy should play a leading role.

In this way, the Fed manages price inflation in the economy. So bonds affect the U.S. economy by determining interest rates. This affects the amount of liquidity. This determines how easy or difficult it is to buy things on credit, take out loans for cars, houses or education, and expand businesses. In other words, bonds affect everything in the economy. Treasury bonds impact the economy by providing extra spending money for the government and consumers. This is because Treasury bonds are essentially a loan to the government that is usually purchased by domestic consumers. However, for a variety of reasons, foreign governments have been purchasing a larger percentage of Treasury bonds, in effect providing the U.S. government with a loan. This allows the government to spend more, which stimulates the economy. Treasury bonds also help the consumer. When there is a great demand for bonds, it lowers the interest rate.

This essay seeks to explain what are monetary and fiscal policy and their roles and contribution to the economy. This includes the role of the government in regulating the economical performance of a country. It also explains the different features and tools of monetary and fiscal policy and their performance when applied to the third world countries with a huge informal sector.

| Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe that policy can manage aggregate demand, and thereby, production and employment, to offset the inherent instability. When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand money supply. However, when aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply. Such policy actions put