Analyzing Policy Response to Increasing Prices of Products and Stock Market Boom in Advanced Economies

This report discusses the policy response to the increasing prices of products and stock market boom in advanced economies. It covers the use of fiscal and monetary policies to manage inflation and sustain economic growth. The report also explores the relationship between aggregate demand and supply and how they affect the economy. The subject is global macroeconomics and the course code and college/university are not mentioned.

Global
Macroeconomic

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Prices of products, such as oil, are increasing due to continued expansion in new &
developing economies. Analyse the policy response for this respective issue...........................3
Stock market boom in advanced economies. Discuss the policy response for this issue...........6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Macroeconomics is the branch of study which deals with the structure, behaviour,
decision-making and the performance of the economy as a whole. There are basically two types
of macroeconomics research that are short-term economic growth and long term economic
growth. There is unequal economic development which is being faced by the country and the
developing countries must enlist the concerned issues so that they can ensures the long-term
economic growth in the market. Price distortions, insufficient domestic resources, government
spending leads to discourage the overall stability of the economy(Mo, Gupta and Singh, 2018).
There are more aspects that includes mounting debt level, level of financial resilience and
increasing rate of climate change which is hurdling the overall economic growth of the economy.
These all factors contribute to the macroeconomics market's equilibrium. These are the factors
which ensures the expansion of the market such as rising prices of oil and the boom in the stock
market in the advance economy also understand in the report. With this, it also cover the merits
of potential policy and its response to the policy maker who are operating in macroeconomics
with the help of aggregate demand and supply.
MAIN BODY
Prices of products, such as oil, are increasing due to continued expansion in new & developing
economies. Analyse the policy response for this respective issue.
Economic growth refers to the increase in the production of products and services in
compared to the particular period of time to another. This basically measures the consumption of
goods and services in the economy as a whole. The economic growth is being estimated with the
help of real and nominal terms. In past times, gross national product (GNP), is the total market
value of finished goods and services that is being produced by the nation during the particular
period of time. It is not definite that aggregate gains in the entire production within the economy
and nor associated with the marginal productivity that helps in increasing the income and
promoting consumer to spend more and purchase as per their choices. In such a way, they are
putting themselves towards quality of life.
It is analysed from the the Focus Economics's projection for upcoming 5 years that for
example, India is the fastest growing economy in the world and the emerging & developing
market across the globe. Last spring, there are many countries which is badly impacted by the

global pandemic and India is one of them, they put complete lock down in the country but with
the passage of time and introduction of domestic vaccination campaign, the investment & export
are rising as per the trade data. This helps in boosting the overall economic development in the
upcoming time.
Aggregate demand is the measurement of total demand of goods and services that are
produced within the economy. It is expressed as the total amount of money. It is also expressed
as the total amount of money exchanged for certain goods and services at the given price level.
On other hand, aggregate supply refers to the total available amount of goods and services for the
further sale of the company. The aggregates demand and supply also helps in analysing the
relationship between that and also analyse how they comply to ensures the flow of goods and
services in the target market. The AD-AS model explains the way of illustrating the national
income and the change in the given prices of the commodities and services. It is the Keynesian
theory, at which the equilibrium level of income is being determined in the economy, when the
aggregate demand is being represented by C+ I (Consumption and Income) curve which is
somehow equal to the total output or the aggregates supply. In such cases, the growth in the
emerging market occurs and also leads to increase the chances of inflation in the large market
due to wrong allocation of money among people belong to different groups.
It is being stated from the above given diagram that rise in the income level of the income
level of consumer tends to influence the overall aggregates demand in the target market. It also

seen that there is the huge inflationary gap due to rise in the aggregate demand that is not
acceptable in the developing nations due to the inappropriate allocation of income.
Increase in the prices of goods and services tends to have the gradual loss of the buying
behaviour of the consumer. It is clear that the quantitative estimate of rate at which the overall
buying capacity of consumer is declining and this is being recorded in the economy. It is vital to
address the situation inflation within the economy as it is being caused by the increases in the
prices of goods and services and also leading to lowering the power of currency holds in the
target market.
All the policy is being made by the central bank and the government of respective
country and also ensure the flow of goods and services in right direction by which they can
contribute to the development of the economy. The government uses fiscal policy so that they
can reduce the inflationary gap within the economy so that they can respond to the economy in
an appropriate manner(Goyal, Verma and Sengupta, 2021). Fiscal policy is being used by the
government for the rapid expansion and the development of the economy so that they can be the
emerging growing economy in the world. In order to cater the certain changes, the government
reduces their spending within the economy so that they can ensures the flow of goods and
services in an appropriate manner. They also have the enough flow of capital and funds so that
allocation of the resources in an appropriate manner. This respective policy focuses on the
expenditure and the revenue which is being used by them. By making better adjustment in the
total distribution of taxes and the expenditure incurred by the government, they increases the
interest rate and reduces the subsides so that they can reduce the overall spending power in the
economy. In this respective approach, the main aim is to manage the overall inflation and when
the government cuts certain expenditure and the increases the overall taxes then it is called as the
contraction fiscal policy in the market and this create the situation of shrink the economy. It also
leads to reduce the amount of money which the firms and the people have for the further
spending.
Advantages of fiscal policy, it helps in the easy implementation which is mostly
concerned with the government's spending and the overall revenue. This also contribute to the
economy growth of the country and majorly focuses during the slump. It also leads to have better
results which is widely acceptable during the early phases of betterment of the economy.

Furthermore, it helps in minimising the loan applications & interest rates which also results in
higher flow of money within the economy.
Stock market boom in advanced economies. Discuss the policy response for this issue.
Advance economy refers to the economies which are not under development nor less
develop countries. These are further classified as the most economically developed nation with
the helps of advanced and innovative infrastructure build by the government of UK. It is the
word that is used by the International Monetary fund(IMF), which designate the world's leading
developed nation in the world(Anwar and et. al., 2021). It is also recorded that when the
company is having the country is the high per capita income as it is shown that the significant
export in the industry and the financial sector, it is the hybrid of the entire global financial
system. Moreover, the economy is being suffers from the market inflation which does not detract
from the community's overall affects of the economy. In such scenario, inflation is the most
desirable thing which can leads to rise the GDP of the economy but the inflation rises over a
certain amount that does not exceed the 3% which have the great influence on the consumer's net
disposable income by which they can leads to have the downfall in the overall flow of goods and
services in the market. With the results, it is also important for the economy to keep the inflation
in control so that the consumer purchasing power rises as well which results in rise in the stock
market. It is the stage in which the nation is getting the boom in the large market.
When the aggregate demand and supply in the target market that is being claimed that
increases in the demand rises in parallel with rise in the overall income level. The aggregate
demand for stock market also increases and it is being understand with the help of given
diagram.

From the preceding curve, it can be said that the purchasing power of the consumer
increases due to the favourable inflation rate and also creates the better consideration in the large
market by which they can maintain the economic inflation and leads to establish the sustainable
market.
Fiscal and monetary policy is being made by the government and the central bank of UK
with the aim that they can retain in the market for long period of time and formulate such
policies by which they can rightly manage the inflation rate and sustain in the market in long run.
Monetary policy is being employed by the central bank of UK with the aim of maintaining the
inflationary gap by which they can address the overall condition of the economy. Open market
operations, reserve requirement and the discount rate are the certain example of monetary policy
instruments. This respective monetary policy helps in regulating the supply of money and the
people of citizen of nation also manage in an appropriate manner so that the monetary are
distributed in the overall economy. As the government helps the market bank so that they can
control the inflation in the economy. As the National Bank of England helps in the assistance of
the banks by which they can reduce the total consumption rate in the economy in UK. The bank
increases the borrowing rate which is leading to charge higher rates of interest to their buyers and
also tends to reduce the entire floe of money in the large market. With the results, the people are
having the tendency to influence the entire supply of money in the economy.

Monetary policy helps in attracting the consumer spending which results the
expansionary monetary policy in which the bank give the minimum interest rates on mortgages
and loans by which they can inspire the business to grow which results in assuring the effective
working conditions in the economy(Alquist, Bhattarai and Coibion, 2020). Contractionery
monetary policy is the aspect which aims to restrict the amount of money which is available in
the nation. The main purpose of this policy is to limit the inflation is further implemented. When,
inflation arises in the market which leads to get the higher rate of borrowing from the bank and
also allow the bank to lower the overall quantity of money within the economy.
CONCLUSION
It is concluded from the above report that macroeconomics is the study of behaviour
regional and national economy as a whole. It is basically related to the total amount of
commodities and services produced in the economy. In the developing economy, expansion has
affected the overall economy and during considering the total interest rate and the aggregate
demand then they will general move in the market as they tends to pay the overall economy in
the market. The financial aspects build the supplier and also suggested that the whole
progression of cash which is the main component on the lookout of the individual.

REFERENCES
Books and Journals
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Mo, D., Gupta, R., Li, B. and Singh, T., 2018. The macroeconomic determinants of commodity
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World Bank, 2022. World Bank Group Macroeconomic Models for Climate Policy Analysis.