Macroeconomics: Government Policy Objectives, Fiscal and Monetary Policy

This document discusses the key government policy objectives in macroeconomics, namely economic growth and inflation. It explores how fiscal and monetary policy can enable the government to achieve these objectives. The advantages and disadvantages of these policies are also discussed, along with their effectiveness. The document further examines the factors that influence the possibilities of growth for these policy objectives and provides recommendations for better outcomes.

Macroeconomics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
Identify and examine two key government policy objectives................................................4
Explain which fiscal policy and monetary policy will enable government to attain these policy
objectives................................................................................................................................6
Advantages and disadvantages of monetary and fiscal policy as well as measure their
effectiveness...........................................................................................................................7
What factors are influence the possibilities of growth of these objectives of policies and
recommendations....................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Macroeconomics refers to the branch of economics which is dealing with structure,
performance, decision making and behavior of an economy as entire. It assists to better
understand all functioning of the complex modern economic concept. It explain how economy as
the entire functions as well how level of the national based income or employment is a resolute
on basis of the aggregate demand as well aggregate supply (Baccaro and Pontusson, 2018).
Macroeconomics is a important area of the study for a economists. The Government, financial
based bodies and investigator examine general national problems or economic based well being
of a country. It mostly covers gauge fundamentals that are macroeconomic models
or macroeconomic based policies.
There are two key government policy objectives one is “Economic growth” and second one is
“inflation”. Economic Growth is essential because this is defines by which people can enhance
quality of their living standard. It also the enables them to provide for any raise in their people in
country without having to the lesser their standard of the living. Inflation is fine when this
combat impact of the reduction, which is a often bad for an country’s economy. When customers
expect cost to increase, they pay out now and boosting economic expansion. An essential feature
of keep a fine inflation rate is the handling prospect of further inflation. Fiscal policy support
in manage economy's growth level so that definite economic objectives can be attained. Cost
stability: It is controls cost stage of nation, thus when inflation is on maximum, price can be the
regulated. Monetary policy can be have the continued optimistic result on the economic
growth in country by avoiding bad consequences of the reduced monetary policy. This needs less
or secures inflation. Rather then, people imagine monetary policy increasing growth by the
stimulating combined demand with less interest rate. When inflation is the tough, then economy
may require a reduce speed. In such kind of circumstances, the country’s government can
adopt fiscal policy to raise taxes to the suck capital out of economy (Brancaccio and Califano,
2018). The Fiscal policy could be also order a reduce in the government expenses or thereby
diminish money in the circulation.
This easy includes the two government policy objectives. Whish fiscal policy or monetary
policy will enable the government to achieve policy objectives. Disadvantages and advantages of
fiscal and monetary, also measure the effectiveness. Factors that are influence possibilities of

success of objectives of policies. At the end of this easy there are some recommendation are
covered for better outputs.
MAIN BODY
Identify and examine two key government policy objectives
There are two main government policies objectives, one is economic growth and second
is inflation in country. Both have huge role in country and its development. Economic growth
defined as increase in inflation-adjusted value in market of products as well services that are
created by the economy of country over time of period. Statisticians conservatively gauge such
success as the percent rate of a raise in the actual gross domestic goods, and real based GDP.
Economic growth is essential through this community can enhance their living standards.
Economic growth is the mainly essential in the developing based economies. Reduced the
Unemployment rate in country. A inactive economy lead to superior rates of the unemployment
as well ensuing social gloom. Economic growth is leads to the maximum rate of demand and
companies also are probable to raise employment (Dawid and Gatti, 2018). Monetary policy
affects the capital supply in the economy of country, that is influences the rates of interest or
inflation rate. this also affect the corporation expansion, employment, net exports, charge of a
debt, as well the relative charge of utilization against saving, each of which is directly and
indirectly affect aggregate based demand. Policy is the usually directed to attain four main goals:
stabilize marketplace, promoting the economic wealth, ensuring corporation development, as
well promoting more employment. Every so often another some key objectives, such as military
expenditure and nationalization, are essential.
Inflation defines to increase in cost of the most of products as well as services of regular
and common apply, like food, housing, clothing leisure, transport, customer staples, and many
more. Inflation process the standard price modify in basket of products or services over the time
period. Inflation happen when the economy of country is raise due to enlarged spending without
the associated enhance in making of products or services (Dornbusch and Edwards,. eds., 2019).
When this occurs, cost increase and money within country’s economy is value fewer than this
was before. The cash basically won’t purchase as much as this would before it. When the
currency is a value minus, it also exchange the rate of weakens at the time of compared to

another kind of currencies. Conversely, this depends on the whether some nations are inflating
fewer than own nation. If they were inflating earlier than own nation, country’s currency may
make stronger, that is a essential purchasing the power parity row. There are lots of concept
utilizing to manage inflation; some of work fine, although others may have negative impact. For
an example, managing a inflation rates throughout wage or cost controls can be reason
a recession or cause job losses.
One well known concept of managing inflation is throughout the contractionary fiscal based
policy. The objectives of the contractionary based policy is to decrease the capital supply within
the economy of country by reducing bond rates and enhancing the rates of interest. This assist in
decrease the expenditure the reason when there is fewer changes to go roughly: those who have
capital desire to remain it or keep it, as a substitute of expenditure it. It also defines there is fewer
obtainable credit, that can decrease expenditure (Dosi, and Roventini, 2019). Reducing expenses
is essential during price rises because it assist stop economic increase or, in turn, rate of the
inflation. There are some key equipment to carry out the policy. The primary is to enlarge
rates of interest throughout central bank of country. In context of U.S., that's Federal Reserve.
Fed Funds based Rate is rate at that banks are borrow capital from government of nation, but in
order to create money, they must lend it at higher rates. There are some ways through
government control the price rises like as, Reserve needs, The second method is to
enhance reserve needs on amount of the capital banks are lawfully needed to hold on hand to the
cover withdrawal. The more capital banks are needed to keep back, fewer they have to provide to
customers. If they are have fewer to lend, users will borrow a smaller amount, that will reduce
expenses. Reducing wealth Supply, The third tool is to the directly and indirectly decrease
wealth supply by the enacting based policies that support the lessening of currency supply. There
are two examples that are considered the calling in a debts which are owed to government or
rising interest paid on the bonds thus that added investors will purchase them.

Explain which fiscal policy and monetary policy will enable government to attain these policy
objectives
Fiscal and monetary policy is defined as the most considered and significant tools which
are used to influence nation’s economic activity. In relation with monetary policy it is concerned
with the overall management of interest rates and the total supply of money carried out in
circulation. In accordance with fiscal policy it is a term which is in relation with taxing and
spending certain actions of governments. The main role of government is to make the economy
stable in order to achieve all macro-economic goals like in terms of price stability, economic
growth and many more. The government makes the usage of fiscal policy to encourage economic
growth. It is the main instrument of government which is used in order to create economic
growth. The main element which is used by them is the expansion fiscal policy. In relation with
this government spends more or cutting taxes to put up more money into the economy. It is used
at the stage when economic growths need to be enhanced (Krugman, 2018). It is considered as
the important element as well as an efficient fiscal policy because through this the economic
growth gets enhanced as it gives more incentives to do work in terms of their overall income. It
will enable the government to increase the productivity level and they would also receive good
amount of income to be spent in the economy. In relation with the monetary policy the
government achieves economic growth with the help of accommodative monetary policy.
Through this government promotes the level of economic growth. Through this it enables the, to
influence the growth level with the help of various channels. It enables the government in
achieving all objectives by the contribution that is made in terms of sustainable growth which is
the maintenance of price stability. Government uses different tools in order to effectively check
the money supply with the view point of maintaining stability level till long period of time.
Monetary policy contributes to high consumer spending due to which all the investment projects
makes more attractive. Through this the output level gets increased and ultimately economic
growth.
On the basis of the objectives of controlling inflation the government can achieve it by using
contractionary monetary policy. The main aim behind it is to decrease the money supply within
the level of economy by increasing interest rates as well as reducing all bond prices. In relation
with this it also helps in decrease in overall spending and the overall credit is also less available.
There are certain other methods also through which Federal Reserve controls overall the money

stock. It enables the government to change all reserve requirements while expanding the impact
of money multipliers (Nakamura and Steinsson, 2018). In relation with fiscal policy it enables
the government in combating the increasing inflation rates. As it is the main revenue generating
policy of government. It makes the contribution in terms of pushing the level of demand beyond
gross domestic product that ultimately leads to inflation.
Advantages and disadvantages of monetary and fiscal policy as well as measure their
effectiveness
 Expansion fiscal policy: - The main advantage of this fiscal policy is that it increases the
level of productivity and the reason behind it is to increase overall money supply. As it
enables the government to increase the level of economic growth; the demand for goods
and services gets increased. It also helps in enhancing economic growth especially during
the period of recession. It decreases certain laws and policies of all the interest rates as
well as loan applications. Due to this the capital of the economy gets increased. Another
advantage of expansion fiscal policy is this that it increases the demand of labor also. In
accordance with this government finds it easier to increase the level of operations and
reduce overall unemployment (Sachs, 2020). Though it has many advantages but at the
same point of time it has certain disadvantages also like it increases the outflow of the
government due to which taxation gets reduced. As taxes get decrease it leads to
increment in the budget of government. There is also lack of price stability and as the
money supply gets increase the importance of products get reduced.
 Contractionary monetary policy: - In accordance with this contractionary monetary policy
it is helpful for government to deal with inflation. It keeps the prices in stable manner
which is a good advantage for the government because on the basis of this the confidence
level of audiences gets increase. Besides this there are certain disadvantages also and it is
mainly that it reduces the level of production. The reason behind this is that due to
reduced demand of all products companies will try to reduce their products.
 Accommodative monetary policy: - The main advantage of this policy is that it creates
the impact on overall national income and provides immediate effect on the level of
economy. It also reduces the usage of negative products and services. Another advantage
which is there for government is that it reduces the gap between rich and poor people and
at the same point of time controls the demand level. There are various disadvantages also
and the main thing is that it decreases the level of flexibility because of changes which
government takes in the form of certain taxes.
 Federal reserves: - In enables the government to deal with the objective of inflation.
There are different advantages of Federal Reserve as it increases the level of
predictability as well as transparency (Syverson, 2019). Through this it helps the
government in explaining about all the actions which they take and make predictions with
respect to that. It also creates an influence on credit and money conditions. Through this

government effectively maintain whole financial system. At the same point of time there
are certain disadvantages also like it is been considered that it increases the level of
instability as in certain situations government is not able to manage overall policies.
What factors are influence the possibilities of growth of these objectives of policies and
recommendations
There are various kind of factors that are influence the growth of economic growth as
well as the inflation, as per both there are also includes some recommendation, natural
resources may affect the growth or economy because in current scenario is very default to
explore and attain natural based resources. To adopt natural resources in production method it is
very expensive that is impact the economic growth. Now day people are demand for only natural
resources because it harm less to community as well environment. Physical infrastructure, if
country have poor physical capital than it affect the growth or economy and inflation as well.
Improved investment in the physical based capital, like as industries, machinery, as well as
roads, will lesser price of economic based movement (Haldane and Turrell, 2018). Well
industries or equipment are more creative than the physical labour. This maximum efficiency can
raise results. For an example, having the robust public road model can decrease inefficiencies in
the affecting raw materials and products across country, that can enhance its GDP. Through this
unnecessary inflation rate also decrease. Labour and population, if country don’t have effective
workforce than it provide less outputs to the country and impact the growth in negative manner.
Through this factor the inflation rates also gets increased. A growing labour and population
defines there is raise in accessibility of employees or staff, that refers a maximum rate of
workforce. One the downside of a having a huge population is which it could provide to
maximum rate of unemployment. Human capital, poor of human can show the negative image
of economic growth. An raise in investment in the human capital can enhance quality of
workforce. This raise in a quality would output in an development in abilities, skills or training.
A more skilled employees has a important impact on the growth since capable staffs are better
productive. For an example, the investing in a STEM students and subsidizing coding the
academies would raise availability of employees for maximum-skilled based jobs that is pay
extra than investing in the blue-collar based jobs (Wagner, 2020). Technology, in current
scenario the technology play huge role in the increasing the growth of economy now days every
country adopt this for develop lots of things in their society or community to enhance the living

standard. Technology helps in every aspects and other business activities as well through this
country can build good relations with other country in terms of exchange their services and
products and create more jobs for people (Wright, 2018). For country it is must too invest in
technology so that they can make better development in their nation. Through useful technology
each and every work makes easy for the business, government and for society because now days
community is more active on digital platforms.
CONCLUSION
It is concluded the above report, macro economics have huge role in country in many
aspects such as economic growth, some government policies that are essential for country in
performing business activities. There are major two government policy objectives are explained
one is inflation and other is economic growth. Both are important for country. There are some
fiscal policies, through this economic growth can be increased and inflation rate can decrease. By
regulating some effective policies by which country can achieve the better economic growth and
reduce the inflation rate of community. There are some factors are explained which are affect the
growth of both the objectives. To overcome from those there are some recommendations are
covered.