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 …
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.
Although governments have the objective of low inflation, it doesn’t necessarily follow that if inflation is bad then the opposite, deflation, is good. We have already looked at inflation and seen that it is a rise in the average level of prices in an economy over time; but we need to be careful to distinguish …
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.
The website Econstories.tv has produced a rap video about the arguments of Keynes and Hayek. It gives a good summary of the two and also shows the conflict between their ideas (a potential issue for evaluation). The website also has the lyrics (and song download) and further information about the 2 economists. Please upgrade your …