Macroeconomics: Policies, Unemployment, Advantages and Disadvantages

This report discusses macroeconomics policies, government policies to decrease unemployment, advantages and disadvantages of fiscal and monetary policies, and challenges faced by the government in implementing these policies. It covers topics such as fiscal policy, financial policy, monetary policy, and the effectiveness of these policies in reducing inflation and unemployment. The report also includes graphs and data to support the analysis.

Macroeconomics

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Identify and analyse macroeconomics policies. Also explain the policies used by
government to decrease unemployment over the last 10 years...................................................3
2. Explain advantages and disadvantages of government policies and measure effectiveness of
these policies................................................................................................................................6
3. Describe the challenges faced by the government in implementing these policies.................8
CONCLUSION..............................................................................................................................10
REFERNCES.................................................................................................................................11

INTRODUCTION
Macroeconomics policies is mainly concerned with the economic growth of a country
which considers increase in level of GDP, a higher GDP means there are increased chances of
consumption which is known as ceteris paribus. The foremost goal of macroeconomics policies
is to minimise or reduce unemployment. Therefore, there would be decrease in the taxes and
increases in the government spending.
This will help the AD curve to shift rightwards. Inflation occurs due to the increase in the
prices of the products because of the increase in the price of the production and decrease in the
worth of currency. When value of a currency depreciates per unit cost more for the foreign
currency (Andreoni, 2020). However, it basically depends on the country of which currency is
depreciating which means that other country value will automatically appreciate.
In the following report, it explains about macroeconomics and how it helps in reducing
unemployment. It also explains about the advantages and disadvantages of these policies and
also describe the key challenges face by the government and also provide recommendation on
the existing situation.
MAIN BODY
1. Identify and analyse macroeconomics policies. Also explain the policies used by government
to decrease unemployment over the last 10 years.
Macroeconomic policies are used to operate in the economy as whole. These policies are
used to operate the economic activities in the economy. These policies are implemented by the
government in order to achieve the long term goals of the country. These policies are framed and
implemented by the government and functioning of these policies can be measured by economic
growth as well as the inflation rate of the nation. These policies help a country in sustainable
development of their market. These helps in generating jobs, increase the standard of living and
also focuses on maximising wealth of the local people. It also focuses on balancing the funds
with the poor people and rich people (Arestis and Sawyer, 2019). Macroeconomic policies
maintain stable and growth of the market. Following are the policies that are covered in the
following paragraphs.

Fiscal policy helps in determining the expenditure and income of government. The taxes
that are levied by the government is to be borne by the individuals, through which the tax is
collected.
Financial Policy of the macroeconomics highpoints the practise of government's revenue
and its expenditure. The level of duties that the administration charge on the persons of the
nation. This plan of the government helps in steadying the economy by employing the
apportionment of duties and the government payment. The major aim of this policy of the
macroeconomics is to bring changes in the aggregate demand in the economy by manipulating
the disposable income of the people in the economy. The functioning of this policy is discussed
here. When the economy is facing an inflationary situation in the economy, i.e., the general
prices of different products in the economy are rising. To cater this situation, the government
needs to slow down the economy as there is higher flow of money in the economy (Gerard and
et.al., 2021). To do so, the administration will increase the tax rates for the economy which
would make the dissimilar banks to rise their own interest rate for the credits and loans, this
would make the debtors to copy less amount of funds which would in turn decrease the
speculation in the economy with lessening in ingesting. This chain of effects will help the
reduced to lower down the extra money flowing in the economy. The second case is of
depression, the economy is commerce with deflation, that income that there is very measured
flow of assets in the economy. In such a case, the administration will try to carry down the tax
rates they take from the persons and surge their expenditure, this will affect the banks to
reduction the different interest rates on credits and provide reserves on lessened charges, this will
upsurge the investments in the corporate and rise the throwaway income of the consumers and
they will consume more. The aggregate demand will tend to rise and the deflationary break will
decrease in the economy. These chain of belongings are the main way by which the
administration of an economy emphases in manipulating the aggregate demand to cater to the
issues in the economy.
Monetary Policy of the macroeconomics refers to the practise of gears like open market
processes, discount rate, reserve necessities. The monetary policy controls the amount of money
which is obtainable with the people of the nation and how these financial funds are provided and
dispersed in the economy (Hammermann and et.al., 2019). The administration uses the help of its
national bank to deliberately manage the inflation, monetary growth, rate of consumption etc.

The main focus of this policy is the financial transmission instrument which take place in the
economy. In the fiscal policy the central bank of the republic acts as the intermediary. If there is
a case of inflation in the economy, which means that there is great circulation of currency in the
economy. The central bank will stock different securities and trade in the open market, when the
investors occupy with these securities and purchase them, the additional amount of reserves
which are graceful in the market and with this, the reserves in the economy will reduction,
transporting down the inflationary gap in the economy. If there is a case of deflationary pressure
in the economy, the central bank will purchase back its securities and buy from the open market
operations (Harting, 2021). This buying will provide more funds with the people in the economy,
the investments and the drinking in the economy will increase making the aggregate demand
better and reducing the deflationary gap in the economy. The aim of this rule is to cater the
passage of cash in the economy.
From the above graph, it can be assessed that the inflation rate is very fluctuating in the years. It
can be identified that the idea inflation rate must range close to 2 %. But, it can be seen that the
rate is approximately 6 % in the year 2022, which is not good for the welfare of the country. In
2012, the rate was approximately 3 % when the recession got over, then it decreased to about 1
% in 2016. The economy has the inflationary pressure of long run for the implementation of
fiscal and monetary policy.

The above graph showcases the unemployment rate of the UK of past 10 years. In 2012, the
country was facing the 8 % rate of unemployment which has now diminished. It can be
examined that the rate is consecutively decreasing throughout from the year 2010 to 2020. But
after that it shows a sudden hike. It is due to the factor of pandemic that has shaken the world
and the whole economy of UK.
2. Explain advantages and disadvantages of government policies and measure effectiveness of
these policies.
Fiscal policy: In this policy, spending’s of government and taxation policy is used to influence
the economy. This policy is basically implemented to reduce poverty and promote sustainable
development (Homburg, 2017). There are three types of fiscal policies namely, expansionary
policies, contractionary policy and neutral policy.
 Neutral: This policy is undertaken when the economy is at equilibrium. In the following
situation all the expenses incurred is fully funded by the revenue earned by the
government in form of taxes.
 Expansionary: This policy is undertaken when the economy is in recession and
government needs to increase the economic activities. In order to increase the economic
activities government spends more funds than the taxes collected by the government.
 Contractionary: In the following type of policy is adopted to pay off governments debt
and capitalisation in inflation. In the following case government spending is lower than
the tax revenue of the government (Iwanaga, Duong and Minh, 2020).
Disadvantages of Fiscal policy:
Inflexible: A change in direct tax may take several time in order implement those rules
into reality. Government spending’s are also non unilateral which means that there may be

variations in the amount allotted to a project and actual amount invested. For example,
government have to pay the pensioners at the end of a month in such case the government does
not have any other option than to pay those pensioners. It becomes obligation of the government
to pay off the liability and if it not possible to pay those pensioners then also government have to
pay to these pensioners and cannot stop it in between (Monasterolo and Raberto, 2018).
Conflicts: Objective mentioned in the fiscal policy is may be adversely affected by the
actual condition in the economy. It is designed in such a way that it influences the AD curve and
reduce inflation.
Economists on the supply side believe that fiscal measure will have distinct effect on the
economy. For example, increase in the income tax affects labour because with implements of
direct income tax rule with increased price it can be seen that the price of labour also increases.
Advantages of Fiscal policies:
Fiscal policies help in shifting the demand curve as well as increase the actual output and
decreases the rate of inflation. This may eventually work with increase in the government
spending’s on education and training and decreasing the rates of taxes that will motivate to earn
more and invest.
Fiscal policies are very effective in reducing the rate of inflation and it also helps in
reducing the level of unemployment. Multiplier effect helps in combating the unemployment
status of a country (Naderipoor, Nabieyan and Jalaee, 2018).
Monetary policy: In this policy the supply of money is controlled by the apex bank of the
country. It is regularised by the apex bank of the country which sets the rules and implement
those rules to control the supply of money in the economy. By way of managing supply of
money central banks aims to influence macroeconomics factors, economic growth and rate of
consumption.
Advantages of monetary policy:
Helps in attracting more investment: In this the banks lower their interest rates in order to
increase the amount of investments in the economy. In this situation more business owners will
be encouraged to expand their existing businesses and also helps in planning for new businesses.
The prices of the goods will also have lowered with this, which would have left more income
source with the individuals to buy more with the less price. It will help business to earn more

profits selling more commodities and local people will get benefits while purchasing the goods at
cheaper rates.
Provide ease to central bank: Federal Reserve with the help of this ease, it has been able to print
more currency in the country. It eventually decreases the interest rate which help in more
borrowing.
Lower rate of mortgage: In the following case, lower interest rate allows to have more cash in
hand which ultimately increases the spending power of the consumers (She, 2020).
Low inflation rate: Monetary policies are the medium through which proper check of inflation
rate is tracked. The applicability of the monetary policies can be seen through the previous
inflation rates. Lower rate of inflation would allow the investor to invest more as there is a lot of
funds left in the banks and NBFC's for disbursement.
Transparency and Predictability: Policy are made based on the previous records and
announcements are made of new polices.
Political freedom: Central bank acts different from the government which separates it
government from the central bank, that will facilitate the apex bank in taking decision by their
own.
Disadvantages of monetary policy
These policies do not guarantee the recovery of the economy with the help of monetary
policies because it not necessary that the results of the policies will be same as which was
assumed by framing the policies.
It is not helpful when the world is under recession because it is not possible to overcome
the global on the businesses. It can only help in reducing or overcoming the recession of a
country.
These policies take time to implement as these are firstly framed and they these have to be
implemented on the economy as a whole it takes to implement on such a large scale.
3. Describe the challenges faced by the government in implementing these policies.
Macroeconomics addresses extensive economic issues that affect the total population.
Representatives, therefore, have to make macroeconomic choices such as setting interest
rates and matching a nation's inflation with both its trade and the overseas exchange rate.
Launching financial conditions that simplify a rise in private sector investment also helps
policymakers to rise economic development while falling poverty (Tarne, Bezemer and

Theobald, 2021). Policymakers have to take many issues into consideration when undertaking
wide glitches such as joblessness, inflation, and a country's present gross domestic product
(GDP).
Philosophies on how to achieve growth and a strong economy vary. Economic policies
endorse that a government run a budget excess during times of fiscal wealth and a shortfall
during a recession. Traditional economic policies take a more hands-off approach throughout a
recession, believing that the marketplaces correct themselves when left unhindered and that
extreme government borrowing or interference negatively affects the market probable for
retrieval. Policymakers, therefore, have to touch some contract or clearance with one another on
what methods to take at any assumed time.
Policymakers constantly want to avoid a depression, which occurs when there has been a
tremendously severe slump. A depression typically carries with it amplified unemployment,
bigger poverty, abridged credit, a lessening GDP, and overall financial volatility. Reduced
stockholder confidence makes it progressively difficult to get wealth back into the economy to
stimulate growth. Policy changes are often needed in this illustration to soothe the economy and
reverse the belongings of the lengthy recession.
Policymakers have a hard job when it comes to macroeconomics. Fiscal factors are
interrelated in so many behaviours that an alteration in one issue can have unintentional
significances on multiple others. Policymakers, therefore, have to uphold a fairly gentle
balancing act while annoying to tip the scales toward economic growth in ways that do not
increase overall economic instability (The and Shanmugaratnam, 2021).
Studies show that wealth build-up by the private sector energies growth. Therefore, a key
objective of a republic’s poverty decrease strategy should be to found circumstances that
simplify private segment investment. No magical bullet can assurance amplified rates of isolated
segment investment.
The challenges that the country faces in implementing the policies are sustainability for
the growth of the economy. It is linked with the future of the country by saving the natural
resources. But the growth in the inflation rate has reduced the sustainable behaviour of the
resources which has led to effect the implementation of policies. The government requires the
change in the demand and the supply thereby effect the economy and trade behaviour of the
nation.

The another challenge that the country faces is of the poverty reduction, which is happened
due to reduction in inflation rate (Xu, and et.al., 2021). Because when the country plans to lower
down the inflation, on the other hand, poverty increases which lessen the growth rate of GDP of
the nation.
CONCLUSION
From the above essay, it can be asserted that the macroeconomic policies are critically
analysed by the government for making a sustainable environment for the people of the country.
For this strict action and the amendment are made in the policies. The two types of policies are
fiscal and monetary policy. The monetary policy is maintained and modified by the central bank
of the nation. The fiscal policy included the tax duties, spending of the government, demand and
services. It also helps in managing the inflation and unemployment rate of the country. These
policies play an important role in the developing the nation and sustaining the annual growth rate
of GDP. The government have to critically analyse and make various strategies for maintain the
rates for the economic welfare of the country. It helps in stabilizing the economy by generating
an economic output for the nation. Moreover, the different challenges are faced by the economy
for implementation of the various policies in the country. For this the critical evaluation of the
policies is described by identifying the pros and cons of monetary and fiscal policy. It is
necessary for the evaluation as it also describes the macro - economic environment of the
country by stabilising the environment of the nation.

REFERNCES
Books and Journals
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Arestis, P. and Sawyer, M. eds., 2019. Frontiers of Heterodox Macroeconomics. Springer
Nature.
Gerard, F. and et.al., 2021. Assortative matching or exclusionary hiring? the impact of
employment and pay policies on racial wage differences in brazil. American Economic
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Hammermann, F. and et.al., 2019. Taking stock of the Eurosystem’s asset purchase programme
after the end of net asset purchases. Economic Bulletin Articles. 2.
Harting, P., 2021. Macroeconomic stabilization and long-term growth: The role of policy
design. Macroeconomic Dynamics. 25(4). pp.924-969.
Homburg, S., 2017. A study in monetary macroeconomics. Oxford University Press.
Iwanaga, S., Duong, D.T. and Minh, N.V., 2020. Impact of policies on raw material procurement
in the Vietnamese timber processing industry: A case study of sawmills in Hue City. Journal
of Forest Research. 25(2). pp.59-68.
Monasterolo, I. and Raberto, M., 2018. The EIRIN flow-of-funds behavioural model of green
fiscal policies and green sovereign bonds. Ecological Economics. 144. pp.228-243.
Naderipoor, H., Nabieyan, S. and Jalaee, A., 2018. Studying the Effect of Business Cycle on
Production, Employment, and Investment in Agricultural Sector of Iran. Macroeconomics
Research Letter. 12(24). pp.73-94.
She, Y., 2020. Essays on Macroeconomics of Monetary and Fiscal Policies.
Tarne, R., Bezemer, D. and Theobald, T., 2021. The Effect of borrower-specific Loan-to-Value
policies on household debt, wealth inequality and consumption volatility (No. 212-2021).
IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
Teh, K.P. and Shanmugaratnam, T., 2021. Exchange rate policy: Philosophy and conduct over
the past decade. World Scientific Book Chapters. pp.82-113.
Xu, Q. and et.al., 2021. Port rank-size rule evolution: Case study of Chinese coastal ports. Ocean
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