Macroeconomics Policies
what type of macroecomics policy (monetary,fiscal, structural) might include each of the following actions:
a Abroad government initiative to shift from a high energy-use economy to a low -energy use economy.
b A Government spending program to improve roads and other infrastructure during a recession.
C series of internet rate cuts by the central bank to stimulate spending in the economy.
d an attempts to reduce the government budget deficit by raising taxes.
e central bank provision of additional cash to the banking system during a financial crisis.
f a decision by developing country to impose controls on international capitals flows.
Macroeconomics Policies
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MACROECONOMICS POLICIES
Macroeconomics involves two major short-term policies, fiscal and monetary policies.
Each of the policies addresses different issues in macroeconomics but they are all projected
toward realization of economic stability. In monetary policy, money supply is regulated by the
central bank. The policy mainly focuses on money circulation especially between banks. Central
bank usually intervenes to regulate interest rates formulated by different banks. Fiscal policy on
the other hand entails government intervention to manipulate a country’s economy by means
such as taxation and revenue collection. In most cases, governments focus on demand
manipulation to cause stability. Fiscal policy is significantly influenced by the political status of
a nation unlike the monetary policy. Implementation of the monetary policy is considerably
easier compared to that of the fiscal policy. Key players in the regulation of economic stability
are the government and a country’s central bank.
Contrary to the short-term effect of fiscal and monetary policies, a third macroeconomic
policy, the structural policy encompasses long term methods of creating economic stability
(ABDEL-KADER, 2013, Pg. 46). Structural policies work on price control, management of
public resources, labor, and social aspects among other variables.
Structural policies would for instance be implemented if a government wants to create an
extensive shift from an economy highly dependent on energy to one that would have little
dependence on energy. A decision by a country to regulate international capital flux would also
entail the structural policy. On the other hand, the government would apply the fiscal policy in
improvement of infrastructure in a state of economic recession. Likewise, the fiscal policy of
macroeconomics is likely to be applied in a bid by the government to contain a budget deficit by
increasing taxation. Instances of monetary policy application would include central bank’s act of
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MACROECONOMICS POLICIES
increasing money supply to financial institutions. The same policy would be effective if the
central bank induces cutting of internet rates so as to improve the state of a country’s economy.
Reference
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MACROECONOMICS POLICIES
ABDEL-KADER, K. (2013). What are Structural Policies? International Monetary Fund, 50(1),
46-47
