Impact of Macroeconomic Policies on Emerging and Advanced Economies

This report analyzes the impact of growth and merits and demerits of policies on emerging and advanced economies. It explains the responses of policy on their aggregate supply and aggregate demand in the economy. The report also discusses the impact of inflation on the economy and how macroeconomic policies can be used to control it. The study concludes by discussing the importance of fiscal and monetary policies in maintaining a stable market.

MACROECONOMICS
POLICIES

Contents
INTRODUCTION...........................................................................................................................3
Main Body.......................................................................................................................................3
Emerging market has caused growth in the prices of commodities such as oil..........................3
Reason behind the boom in the Advanced Economy..................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Macroeconomics is a study of a nation or a economy as a whole. It includes activities
such as total amount of sales, changes in the prices of a commodity and level of unemployment.
There are various tools that are used in the macroeconomics includes Government spendings and
taxation, monetary policies that helps in influencing the money supply and also controls actions
of banks. This helps in achieving equilibrium in the market. It is a position where the market
supply and market purchases are equal (Arestis, 2018). This report will analyse the impact of
growth and merits and demerits of policies. Also explain the responses of policy on their
aggregate supply and aggregate demand in the economy.
Main Body
Emerging market has caused growth in the prices of commodities such as oil.
Economic growth refers to the increase in the production of goods and services. It is
basically compared with the another period (Auray and Eyquem, 2020). It is measure in nominal
and real terms. In traditional context it is measured in terms of Gross National Product (GNP).
Economic Growth is generally refers to the rise in production that is correlated with the average
marginal productivity which directly leads to change in the level of consumer and also causes
change in the consumer sastisfaction.

In a growing and emerging economy. For example, India is an developing economy in
the world in which developed countries are finding a way to invest and which is covered by
Focus economics over the next 5 years. Companies have been hidden hard by the global crisis
and pandemic situation. Its causes and implication can be seen in the market environment. These
economies encourage economies to invest in such countries which helps in providing jobs and
implementing those funds to establish a huge company (Benmelech and Tzur-Ilan, 2020).
Aggregate demand measuring the total amount of money spent on those goods and
services produced in the economy at a given price level. Aggregate demand is calculated as
individual consumption, investment, government spending and the differences in exports and
imports. Aggregate supply means supply of all goods and services produced in an economy at a
presented price level at a given period of time. There are two basic components of collective
supply that is consumption and saving model that represents what has been the in total demand
and supply processed by a related business in competitive environment. It also helps to ensure
effective interaction on macroeconomic level that makes sure that the working of company in
economy is done in correct measures (Chiu, 2020) (Dornbusch, 2019). AD-AS model defines the
output and price level with reference to relation developed in case of aggregate supply and
demand. It can be explained as a theory that was stated by John Maynard Keynes. In such cases,
expansion and related growth in emerging market takes place that leads to increase in chances of
inflation in market places that can also be portrayed as allocation of funds that might not be done
in a proper manner that must have led to difference in income levels (Boissay and
Rungcharoenkitkul, 2020). This takes place when inflation exists and further can be explained
with the help of given AD-AS model curve described as below:

From the above model, it is shown that the due to the increase in the earnings level of the
consumer which also impact the overall expansion of the corporation. It can be seen that the due
to the rise in the inflation there is the inflationary opening in the economy and this is not the
suitable in the rising economies due to the inappropriate allotment of the income to the people.
Inflation means decline in the purchasing power of an individual, It can be seen from the
previous records that it reduces the purchasing power of the consumer. It is caused because if the
increase in demand and inflation in the price of goods. It is necessary for every economy to stop
the adverse effect of inflation. In an ecosystem inflation is good until it rises at minimal rate
(Ferrara, Lhuissier and Tripier, 2018).
The policy maker is the administration and the apex bank of the nation whom ensures
better working in financial institutions. In order to save a nation from inflationary gap monetary
policies are taken into consideration to reduce the impact of inflation. In case of inflation
government charges more for the loans disbursed to control the inflation. This policy attracts
foreign investors to invest in the country. The policy is framed in such a way that it provides
stability to the economy. And in case of depression government provides loans to the public at

lower interest rates in order to spend more. In this way Government manages inflation (Loayza
and Pennings, 2020).
It can be predicted that due to increased level of income of customers it had affected the
overall growth and development of organisation. IT can be observed that the rise in inflation
leaded to inflationary based gaps in business and it is not fruitful in rising economies of scale.
Merit of this strategy helps in increases in jobs as many of the individual gets jobs with the
implementation of economic policy. It facilities those whom are in need of money and raises
money invest it to the business operations. For meeting the demand of the market many buyers
and sellers manufacture more and establish new units in order to meet the demand of the existing
market and future demand.
Reason behind the boom in the Advanced Economy.
Finances in the advanced country are available at cheap rates as compared to the under
developing nation. They are distinct as the term which is used by the global monetary deposit in
order to describe the most industrialised countries across the globe. In the economy when there
are individuals whom earn more capital income and also work on a large scale they help the
economy to grow on large scale. In such situation where the budget of the country get inflated
because of the increase in the inflation the government also have to spent more on those projects.
Nevertheless, the development in these economies is products, that results in higher in
GDP growth, however if the surge exceeds a certain threshold, such as 3%, it would have an
influence on the client's net disposable income. As a result, it is critical for the cheap to keep
inflation under control in order to fulfil the firm's overall effectiveness. When the economy
expands, the cost of commodities begins to rise, and the user's purchasing power rises as well,
leading to a rise with in financial markets. This is the stage at which the company is seeing a
surge in a vast market. (Shah, Hiles and Morley, 2018).
When it comes to analysing collective demand and cumulative supply in the economy, it
can be argued whenever a consumer's consumption increases in parallel with an increase in
revenue, the accumulated demand for the stock market rises as well, as illustrated in the graph
below.

From the preceding graph, it can be seen that improvement in buying power correspond
with advantageous inflation, resulting in a simultaneous demand shifting towards D to D1,
indicating an increase in overall consumption feeding. However, it tends to raise the total values
of products in the market, making it difficult for individuals to buy the items and services they
seek.
In order to control wealth inflation and create a stable market, the government as well as the
bank devise plans that will allow them to remain relevant in the market and enact policies that
will allow them to think more clearly in the market. In attempt to eliminate the increase in costs,
the bank employs fiscal approach for addressing the economy's situation. Stock markets,
distancing restrictions, and the price will fall are examples of positive monetary policy actions.
As a result, economic policy regulates the amount of money in circulation to the citizens of this
nation, as well as the manner in which such monetary funds are distributed in the economy. As a
result, the government enlists the services of the commercial bank to keep an eye on inflation
with in financial sector. In the United Kingdom, the National Bank of England enlists the
assistance of the country's central bank in order to reduce the economy's total consumption rate.
The bank boosts the borrowing rate so that smaller banks can charge higher rates of interest to
individuals, lowering the total flow of investible funds within the marketplace. They tend to
regulate the global supply of sources of funding in this way. (Shaturaev, 2021).
Fiscal policy brings in the investment policy, and customers are paying further in the
simulative economic policy, wherein banks lower interest rates on commercial loans therefore

that they might urge businesses to expand their operations, ensuring that the financial market
functions properly. While there is inflation throughout the marketplace, this leads to higher
levels of borrowed money out from bank, allowing authorities to decrease the total supply of
wealth in the economy while consumers diminish their real economy deposits. The Federal
Reserve employs this approach to generate money that aids in the acquisition of government
bonds, allowing them to properly secure the country's proper functioning. If the interest rate is
reduced, the banks and economic institution are more willing to lend money to borrowers. The
main benefit of this strategy would be that the pricing in the country remains steady throughout
time, which helps to keep the market's inflation rate low.
CONCLUSION
According to the above study, macroeconomics is the part of the commercial perspective that
assures the better functioning of the market by considering usage and production in the sector
world at large. Inflation effected the total economy in a growing economy, and then when
considering cumulative demand and communal supply, the AD starts to rise in the marketplace,
increasing the money left with both the client, which appears to have improved market support.
On the other hand, a rise in the stock market boosts a customer's overall purchasing power,
causing the general flow of money to take centre stage in the marketplace.

REFERENCES
Books and Journals
Arestis, P., 2018. A Coherent Approach to Macroeconomic Theory and Economic Policies.
In Alternative Approaches in Macroeconomics (pp. 127-154). Palgrave Macmillan,
Cham.
Auray, S. and Eyquem, A., 2020. The macroeconomic effects of lockdown policies. Journal of
public economics, 190, p.104260.
Benmelech, E. and Tzur-Ilan, N., 2020. The determinants of fiscal and monetary policies during
the COVID-19 crisis (No. w27461). National Bureau of Economic Research.
Boissay, F. and Rungcharoenkitkul, P., 2020. Macroeconomic effects of Covid-19: an early
review (No. 7). Bank for International Settlements.
Chiu, E.M., 2020. REEXAMINING THE MACROECONOMIC POLICY CYCLE IN
TAIWAN. Hitotsubashi Journal of Economics, 61(2), pp.89-110.
Dornbusch, R., 2019. The theory of flexible exchange rate regimes and macroeconomic
policy (pp. 123-143). Routledge.
Ferrara, L., Lhuissier, S. and Tripier, F., 2018. Uncertainty fluctuations: Measures, effects and
macroeconomic policy challenges. In International macroeconomics in the wake of the
global financial crisis (pp. 159-181). Springer, Cham.
Loayza, N. and Pennings, S.M., 2020. Macroeconomic policy in the time of COVID-19: A
primer for developing countries. World Bank Research and Policy Briefs, (147291).
Shah, I.H., Hiles, C. and Morley, B., 2018. How do oil prices, macroeconomic factors and
policies affect the market for renewable energy?. Applied energy, 215, pp.87-97.
Shaturaev, J., 2021. Indonesia: Superior Policies And Management For Better Education
(Community development through Education). Архив научных исследований, 1(1).