We have already looked at demand-side policies, but governments also have the option to use supply-side policies. These are policies that are designed to increase the productive capacity of a country. As with demand-side policies there are two types: Interventionist policies and Market-based policies. It is important not just to understand the difference between these, …
We have already looked at one aspect of demand-side policy, fiscal policy, and it is important that we also understand the other type, monetary policy. Monetary policy is the use of the interest rate, and money supply, in order to affect the level of aggregate demand in an economy. We also need to appreciate that …
We have now looked at the 5 different macroeconomic objectives of governments (low and stable inflation, low unemployment, stable economic growth, promoting equity and a favourable balance of payments), and the next step is to look at the government policies available to try and meet these objectives. The types of policies can be split into …
A further macroeconomic objective that we study is greater equity in the distribution of the income. Remember that an equitable distribution of income refers to one which is ‘fair’, but that this is a very subjective or normative issue to measure and we therefore use equality as a proxy measure.
One of the government macroeconomic objectives we have already mentioned is stable economic growth. We have already looked at the business cycle and touched on issues relating to economic growth, but it is important that you understand what causes economic growth and the impacts (both positive and negative) that it can have.
One of the major topics that we need to understand in macroeconomics is the distinction between Keynesian and Neo-Classical ideas, and how these different ideas lead to different conclusions about what policies governments should pursue. Below is the second of the Keynes ‘v’ Hayek videos we have watched.