Macroeconomic government policies in reducing

Independent central banks are less likely to make decisions based on political motives.

Policies for reducing unemployment

Finally, while issues regarding the composition of growth also go beyond strict macroeconomics, several general policy observations can be made.

First, the framework should be capable of identifying some of the critical trade-offs in poverty-reducing Macroeconomic government policies in reducing policies.

Bankruptcies in the nontradable sector may translate into unemployment of the urban poor.

Fiscal Policy

Often unemployed is more concentrated in certain regions. The tables reveal that many developing countries are in a state of macroeconomic stability. Evaluation Similar problems to fiscal policy. Inflation targeting sets an inflation target for the central bank and gives the responsibility for achieving the target to the central bank.

The AD—AS diagram can model a variety of macroeconomic phenomena, including inflation. Keynes was an active advocate of expansionary fiscal policy during a prolonged recession. Indeed, evidence shows that successful disinflation episodes have typically been accompanied by sizable and sustained fiscal adjustment Phillips, This contributes the reduced unemployment due to the increased public spending creating more demand and more jobs to increase the supply of goods and servicesbut an increased inflation due to the increased spending and wage demands.

However, even this rule of thumb may not be enough. Operation and maintenance expenditure tied to capital spending should also be reviewed with a critical eye. These studies, however, establish association, but not causation. Usually policy is not implemented by directly targeting the supply of money.

Given that poverty is multidimensional, the action plan will also likely include priority measures with regard to governance, structural reform, and other relevant areas, each of which may have budgetary implications.

However, it will be quite expensive, and it may encourage firms to just replace current workers with the long-term unemployment to benefit from the tax breaks.

Household survey data for a number of countries indicate that the poor tend to consume higher amounts of nontradable goods while generating relatively more of their income from tradable goods Sahn, Dorosh, and Younger, According to these more recent theories, unemployment results from reduced demand for the goods and services produced through labor and suggest that only in markets where profit margins are very low, and in which the market will not bear a price increase of product or service, will higher wages result in unemployment.

The quantity theory of money holds that changes in price level are directly related to changes in the money supply. Import tariffs should have a low average rate and a limited dispersion of rates, to reduce arbitrary and excessive rates of protection. To enhance macroeconomic stability, countries need to support macroeconomic policy with structural reforms that strengthen and improve the functioning of these markets and sectors.

The objectives of such policies should include creating a stable environment and level playing field conducive to private sector investment and broad-based economic growth; removing the cultural, social, and economic constraints that prevent the poor from making full use of their existing asset base and accessing markets; and increasing the human capital base of the poor through the provision of basic health and education services.

Finally, the real exchange rate can affect the poor in two ways. Crowding out occurs when government spending simply replaces private sector output instead of adding additional output to the economy.Fiscal policy is one of the macroeconomic policies which can influence resources allocation, redistribution income and reduce the fluctuation of the business cycle, by varying the amount of government spending and policy can decrease unemployment by helping to increase aggregate demand and the rate of economic growth.

The government will need to pursue expansionary fiscal policy; this involves cutting taxes and increasing government spending.

Lower taxes increase disposable income (e.g. VAT cut to 15% in ) and therefore help to increase consumption, leading to higher aggregate demand (AD). US and UK were more successful in reducing unemployment after /09 recession.


Demand side policies are critical when there is a recession and rise in cyclical unemployment. (e.g. after recession and after recession) 1. Fiscal Policy Fiscal. Economists look for macroeconomic policies that prevent economies from slipping into recessions and that lead to faster long-term growth.

Policies for reducing unemployment

Raising interest rates or reducing the supply of money in an economy will reduce inflation. Inflation can lead to increased uncertainty and other negative consequences.

Macroeconomic – Government Policies in Reducing Inflation and Unemployment

Instead of buying government. Fiscal policy – changes to government taxation, government spending and borrowing; Supply-side policies designed to make markets work more efficiently; Objectives of UK Macroeconomic Policy.

The key objectives for the UK are: Stable low inflation - the Government’s inflation target is % for the consumer price index.

This essay focuses on discussing the role of government policy on reducing unemployment and inflation in relation to Keynesian and Monetarist approaches, including examples of impacts of expansionary fiscal and monetary policies on New Zealand economy.

Macroeconomic government policies in reducing
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