Global Macroeconomic Policies: Growth, Commodities, and Stock Boom

This report provides an analysis of global macroeconomic policies, examining the effects of rapid growth in emerging markets, rising commodity prices (specifically oil), and stock market booms in advanced economies. It utilizes the Aggregate Demand-Aggregate Supply (AD-AS) model to justify policy responses. The report discusses how growth in emerging markets can lead to inflation due to improper allocation of income, and how fiscal policy can be used to address this by adjusting interest rates and subsidies. It also explores how stock market booms in advanced economies increase commodity prices and purchasing power, impacting aggregate demand. Monetary policy, including open market operations and reserve requirements, is discussed as a tool to manage inflation by controlling the money supply and interest rates. The report concludes that effective macroeconomic management is crucial for maintaining economic stability and growth.

GLOBAL
MACROECONOMIC
POLICIES

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Due to the continuous growth in emerging and developing markets the price of the
commodities such as oil increases...............................................................................................3
Stock market boom in advanced economies...............................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Macroeconomics is the subject matter of behaviour of a national or the regional economy
as a whole which is concern with the better understanding events such as total available amount
for the sale, level of unemployment and the general change in the prices. There are tool major
tool of macroeconomics which are fiscal policy that includes taxation and government spending
and second is monetary policy that includes bank control and money supply(Rakshit and Neog,
2021). These aspects helps in attaining the macroeconomics equilibrium in the market. It is the
aspect which ensures the better consideration to the market growth. This respective report will
analyse the impact of rapid growth and developing markets, price of commodities such as oil
increases ad the stock booms in advance economy and also assess the merits or the possible
policy response of the macroeconomics policy makers with the help of Aggregate demand and
Aggregate supply to justify the statements.
MAIN BODY
Due to the continuous growth in emerging and developing markets the price of the commodities
such as oil increases.
Economic growth refers to the increase in the production of economic products and
services and basically compared from one period of time to another. This is being measured in
the real and nominal terms. In traditional times, aggregate economic growth of the country is
being measured in terms of gross national products(GNP).Economic growth is refers to the rise
in aggregate production in the economy but it not always that aggregate gains in the overall
production can be correlate with the more average marginal productivity which leads to rise in
the income level which inspire the consumer to open up their wallets to buy more that means
they are money toward quality life or standard of living.

Illustration 1: The World's Fastest Growing Economies,2021
When talking about the growth in emerging and developing market then the for example,
India is the fastest-Growing economies in the world which is covered by FocusEconomics over
the next five years. When the company was hit hard by the global pandemic, COVID-19 and
facing the harsh lock-down during last spring. Moreover the domestic vaccination campaign is
underway and in current times. As per the trade data, they are encouraging, investments and
exports which helps he economic growth in upcoming year.
Aggregate demand is the amount of total spending on the consumption of the goods and
services in an economy. Whereas, Aggregate supply is the total quantity of output firms can
produce and sell or can say that the real GDP of the nation. Aggregate demand/aggregate supply
model which shows that what determines total supply or the total demand for the overall
economy and how they both interact at the macroeconomic level which ensures the better
working of the economy so that they can rightly used in the market. AD-AS model explains the
price level and output with the relationship of aggregate demand(AD) and aggregate supply(AS).
It is the theory which is given by John Maynard Keynes. In the case, growth in the emerging
market takes place which increases the chances of inflation in the market as it is known that the
allocation of money is being done not in proper manner in which some part of the society is

having higher income level and some are operating in lower income level in the emerging
economies. This arises the case of inflation and further will understand with the help of given
AD-AS Model curve below:
From the above model, it is shown that the due to the rise in the income level of the
consumer which also impact the overall growth of the company. It can be seen that the due to to
the rise in the inflation there is the inflationary gap in the economy and this is not the appropriate
in the emerging economies due to the inappropriate allocation of the income to the people.
Inflation is defined as the decline of purchasing power of the particular currency over
time. It is also seen that the quantitative estimate of the rate that tends to decline in the
purchasing power can be reflected in the economy. It is necessary to tackle the state of inflation
within the economy because It leads to slow down the economy and cause the recession within
the market and results in employment within the economy in the state of high inflation.
The policy makers are the government and the central bank of the countries who ensures
the better working in the economy and also ensures the flow of money in the right direction so
that they can help in the overall consideration of the market. In order to reduce the inflationary
gap in the economy, fiscal policy is being used by the government so that they can measure the
overall inflationary gap and tackle them in an appropriate manner(Padayachee, 2020). As the
individual and corporation prefers to the more loans when the interest rates are low then the
government tends to have the major consideration so that they can rightly measures the proper
working so that they can effectively work in the correct direction. This policy highlights the
usage of government's income and their spending. This policy helps in stabilizing he economy by
manipulating the overall allocation of taxes and the government expenditure. In order to control
the inflation, the government increases the interest rate and on the same hand, they reduced the
subsidies by which the overall expenditure of the consumer can be minimised within the
economy. In such way, they control the inflation within the economy.
Merit of this policy which helps in the reduction of unemployment as when the
unemployment is higher side then the government which implement fiscal policy. It simply
means that the rise in the expenditure or the acquisitions and reducing the tax rates in an
appropriate manner. For meeting the overall demand of the economy which leads to rise the
manufacturing and production that also creates more job opportunities for them. With the help of
multiple measure of fiscal policy, country can enjoy the growth in the national economy.

Stock market boom in advanced economies.
Advanced economics is the nation whose economy is more developed than the less
industrialised nations. As the advance economy has an advance technological infrastructure and
comes under the more economically developed country(MEDC). They are defined as the term
which is used by the international Monetary fund in order to describe the most developed
countries across the world. When the economy is having a high level of per capita income, huge
export and the financial sector which is the combination of global financial system. There is the
face in which economy get the inflation in the market but it does not hurdle the overall
consideration of the community. Boom in share market is the period or increased growth within
the business, market or economy then it leads to have the better consideration in the market
which leads to have huge growth as well.
Somehow inflation in such economies are goods which leads to have the increase the
growth of the economy in term of GDP but if the inflation rises more than the point which can be
of 3% then it will impact the net disposable income of the consumer(Matshego 2019). So it is
vital for the economy to control the inflation so that they can manage the overall functionality of
the business. In case of boom in stock market , the price of commodities increases and
purchasing power of the consumer also increases which leads to rise the share market. This is the
point where the company is taking the boom in the large market.
When understanding the aggregate demand and aggregate supply in the market then it
can be said that when the demand of the consumer increases with the rise in the income level
then the aggregate demand for the share market also increases and this can be shown in the given
diagram.
From the above diagram, it can be said that increases with the purchasing power with the
favourable inflation then the aggregate demand shift from d to d1 which shows the rise in the
overall consumption of the consumer. But it also tends to increase the overall prices of the
commodities in the market by which people become unable to buy the desired goods and
services for their consumption.
In order to control the inflation rate of the economy and make the sustainable market
here, the government and the bank make such polices so that they can rightly retain in the market
and frame such polices by which they can having the better consideration in the market. In order

to fill the inflationary gap, monetary policy is being used by the bank so that they can tackle the
situation in the economy. Monetary policy refers to the certain tools that includes the open
market operations, reserve requirements and discount rate(Aizenman and et. al., 2018). As the
monetary policy controls the supply of money to the people of the nation and also ensures that
how such monetary funds is being supplied in the economy. As the government use the help of
the market bank so that they can manage the inflation in the economy. In UK, The National Bank
of England take the help of its national bank so that they can minimise the overall consumption
rate within the economy. Bank increases the rate of borrowing so that the small banks also
charge higher rate of interest to the people by which they reduces the overall flow of money in
the market. Thus, in such way they tends to control the overall supply of money in the market.
Monetary policy bring the investment policy coming in and consumer are spending more
in the expansionary monetary policy in which the banks are minimised the interest rate on loans
and mortgages so that they can influence the business to expand the business by which they can
rightly ensures the better working within the economy. When there is inflation in the market then
it leads to have the higher rate of borrowing from the bank by which they can rightly reduce the
overall supply of money within the economy and people are minimise their investment in the
market. This policy is being used by the federal reserve to print the money that helps them to
acquire the bonds form the government so that they can rightly ensures the better working of the
economy as well. It the interest rate gets lowered, then the bank and the financial institution give
the loans to the borrowers easily. Major advantages of this policy is that the prices in the
economy get stable within the period of time which helps in minimising the inflation rate within
the economy.

CONCLUSION
From the above report it is concluded that macroeconomics is the branch of economics
which ensures the better working of the economy by considering the consumption and
production in the economy as whole. In the emerging economy, inflation impacted the overall
economy and when taking the consideration of Aggregate demand and aggregate supply, the AD
tends to rise in the market as the income of the consumer increases which tends to have the better
support in the market which is also leading to have the better consideration in the economy. On
other hand, boom in the share market leads to increase the overall purchasing power of the
consumer by which the overall flow of money tends to have the major consideration in the
market.

REFERENCES
Books and Journals
Aizenman, J. and et. al., 2018. Flexibility of adjustment to shocks: Economic growth and
volatility of middle-income countries before and after the global financial crisis of
2008. Emerging Markets Finance and Trade, 54(5), pp.1112-1131.
Carrai, M.A. and Defraigne, J.C. eds., 2020. The Belt and Road Initiative and Global
Governance. Edward Elgar Publishing.
Civcir, İ. and Varoglu, D.E., 2019. International transmission of monetary and global commodity
price shocks to Turkey. Journal of Policy Modeling, 41(4), pp.647-665.
Le, T.H. and Nguyen, C.P., 2019. Is energy security a driver for economic growth? Evidence
from a global sample. Energy policy, 129, pp.436-451.
Matshego, I., 2019. Determinants of the development of a local currency bond market: the
significance of macroeconomic stability (Master's thesis, Faculty of Commerce).
Neverauskiene, L.O. and Rakauskiene, O.G., 2018. Identification of employment increasing
possibilities in the context of the EU socioeconomic environment evaluation: The case
of Lithuania. Economics & Sociology, 11(4), p.51.
Padayachee, V., 2020. A survey of trends in macroeconomic policy and development in the
global South: From World War II to the global financial crisis and beyond 1.
In Inequality studies from the Global South (pp. 55-74). Routledge.
Rakshit, B. and Neog, Y., 2021. Do macroeconomic uncertainty and financial development
cause environmental degradation? Evidence from an emerging economy. International
Journal of Social Economics.