Economic Policy and the Global Government

This report discusses the economic policies that governments use to achieve long-term growth and short-term stability. It covers demand and supply-side policies and examines the policies used by Singapore. The report concludes that a mix of policies is necessary to maintain economic growth and stability.

Running head: ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
Economic policy and the global government
Name of the student:
Name of the University:
Author note

1ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
Table of Contents
Introduction:...............................................................................................................................2
Governmental policies to enhance the stability and growth of the economy:...........................2
Demand side policies:................................................................................................................3
Supply side policies:..................................................................................................................4
Policies taken by the Singapore:................................................................................................5
Conclusion:................................................................................................................................5
Reference:..................................................................................................................................7

2ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
Introduction:
Gaining long term economic growth and stability in economy during the short run is
one of the essential factors that influence the governmental policies by a large extent. In order
to gain the same, government around the world utilise differentiated policies which are
mainly dependable upon the demand and supply side of economy (Agénor and Montiel
2015). This report is aimed to provide a detailed overview of the economic policies that the
respective government need to utilise in order to gain long run economic growth and short
run economic stability. In addition to this, explain the policies taken by the respective
government for the same, this report will focus on the Singaporean economy in order to trace
the implication of the policies so as to enhance the stability and growth of the economy
during short run and long run respectively.
Governmental policies to enhance the stability and growth of the economy:
Governmental policies in order to enhance the economic growth in long run and
stability of the economy during shot run government focus on aggregate demand and
aggregate supply. With enhancement in these two essential factors for the growth and
stability of the economy, government utilise the supply and demand side policies. Various
type of demand and supply side policies that are being utilised by the government are as
follows (Haggard and Kaufman 2018):
Demand side policies:
 Monetary policy
 Fiscal policy
Supply side policies:
 Tax cut, Free Trade Agreements (FTA), privatisation, deregulation and others
 Enhanced infrastructure, improved training and education

3ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
Demand side policies:
In order to enhance the short run stability, demand side policies are beneficial and
when it comes to keep the long run growth higher, then supply side policies can be provided
to be beneficial. As the recessionary period came in during the short run, enhancing the
aggregate demand would increase the price level higher, which in turn will lead to rise in
incentive of the producers to produce additional units of the goods and services (Lardy 2016).
With higher price of the goods and service, producers will produce higher output that will
inherently aid the economy to move forward because, higher output will lead the economy to
have higher employment level.
Now, government of the respective economy can bring in the surge in the aggregate
demand with the effective monetary and fiscal policy. With the cut in the interest rates
government can influence consumer spending. In addition to this, lower interest rate will
eventually reduce the incentive to save in the banks that will enhance the liquidity in the
market. Enhanced liquidity will eventually improve the demand of goods and services in the
economy (Leigh and Blakely 2016).
Contrary to this, government can aid the economic crunch during the short run
through the fiscal policies. With the reduction in the tax rate, enhancement in the government
expenditure, import substitution and export promotion, government can enhance the
economic performance that will stabilise the market during the short run. As the government
will take expansionary policy through the tax cut or additional governmental expenditure, it
will influence the investors to invest more in the market (Rose-Ackerman and Palifka 2016).
Repercussion effect of the same will enhance the employment and the market demand of the
goods and services. Thus it will aid the economy to stabilise its deteriorating demand
situation.

4ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
Supply side policies:
Though there is huge amount of benefit of utilising the demand side policies in order
to enhance the economic stabilisation, however, in certain cases, it can be seen that rise in the
demand of goods and services in an economy has enhanced the inflation rate and eventually
turned an economy in an unsustainable economy in long run. Under this situation, supply side
policies can be beneficial for enhancing the economic growth during the long run and
economic stability during the short run (O’connor 2017). With rise in the aggregate demand,
during the next period, there will be rise in the labour demand and it will further influence the
supply. With additional supply, price of the goods and services will be reduced and more
amount of the produce can be purchased by the consumer with same amount of money during
the successive periods.
As one of the main policies to bring in the growth during the long run, government
often reduce the income taxes in order to boost the incentive to the workers and enhance the
labour supply. With better incentive to work additional hour of work, labour supply will be
enhanced and the productivity of the economy will be enhanced. It will eventually reduce the
price of the goods and services and the demand of the same will be enhanced. On other
instance, government often deregulate the organisations in order to enhance the efficiency of
the same (Mazzucato et al. 2015). With better efficiency, comes the scope of better
productivity and in addition to this it has also been found that it reduces the effect of market
crunch on the overall economy. Thus supply side economy can be utilised by the government
in order to keep the market grow during the long run.
However, in the case of the supply side policies, it has often been observed that it
takes much amount of time in order to prove to be fruitful. Considering the case of the
educational program from the government, it can be seen that, if the government stars
initiative to enhance the educational level of the economy and increase the vocational training

5ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
so as to increase the productivity, then it will take almost a decade or more to prove to be
fruitful (O’connor 2017). On the other hand, during the recessionary period, supply side
policies fails to entice the market crunches and eventually the economy deteriorates from the
growth path of the same.
Policies taken by the Singapore:
Considering the case of the Singapore, it can be seen that the state unlike other Asian
tigers has utilised expansionary fiscal policies in order to deal with the long term growth and
short term economic stability. As the measurement of the same, government of Singapore,
during the last four decades has focused on the medium to long term objectives of the state.
Due to the large amount of reliance on the imports, Singaporean economy opts out itself from
utilising from Keynesian model of demand stimulus option, rather it focused on the supply
side policies. Government of the Singapore provides direct cost cutting to the goods and
services that has aided the consumer of the state to consumer more at a considerable price
(Gomulya et al. 2015). In addition to this, keeping the interest rate higher than the peer states,
Singapore has enjoyed much amount of foreign investment that has aided it to become where
it is now. As cyclical growth practice, in case of the fall in the personal and corporate income
taxes, goods and services tax is increased in order to keep the growth path intact even during
the slow growth years like 2000s (Tang and Tan 2015).
Conclusion:
From the above discussion it has been observed that the growth of the economy
during the long run and stability of the same depends largely on the supply and demand side
policies from the government. With the rise in the aggregate demand, government during the
short run tries to tackle the market crunch and when it comes to the long run growth, then the
government emphasise on the supply side policies so as to enhance the growth path of the
economy. Considering the case of the Singapore, it has been found that, government since the

6ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
last four decades has utilised the mixture of the supply and demand side policies in order to
keep the growth path of the economy intact and let the market move forward in spite of the
market crunches during the short run.

7ECONOMIC POLICY AND THE GLOBAL GOVERNMENT
Reference:
Agénor, P.R. and Montiel, P.J., 2015. Development macroeconomics. Princeton University
Press.
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Cengage
Learning.
Gomulya, D., Chernyshenko, O., Uy, M.A., Francis, W.L.K., Moon-Ho, R.H., Yin, C.K. and
Ong, H.L.C., 2015. Entrepreneurship in Singapore: Growth and challenges. In The
Entrepreneurial Rise in Southeast Asia (pp. 35-67). Palgrave Macmillan, New York.
Haggard, S. and Kaufman, R.R., 2018. The political economy of democratic transitions.
Princeton University Press.
Juncker, J.C., Tusk, D., Dijsselbloem, J., Draghi, M. and Schulz, M., 2015. Completing
Europe's Economic and Monetary Union.
Lardy, N.R., 2016. China: Toward a consumption-driven growth path. In SEEKING
CHANGES: The Economic Development in Contemporary China (pp. 85-111).
Leigh, N.G. and Blakely, E.J., 2016. Planning local economic development: Theory and
practice. Sage Publications.
Mazzucato, M., Perez, C., Fageburg, J., Laestadius, S. and Martin, B.R., 2015. Innovation as
growth policy. The Triple Challenge for Europe: Economic Development, Climate Change,
and Governance. Oxford: OUP, pp.229-264.
O'connor, J., 2017. The fiscal crisis of the state. Routledge.
Rose-Ackerman, S. and Palifka, B.J., 2016. Corruption and government: Causes,
consequences, and reform. Cambridge university press.
Tang, C.F. and Tan, E.C., 2015. Does tourism effectively stimulate Malaysia's economic
growth?. Tourism management, 46, pp.158-163.