Policy Responses to Commodity Prices and Stock Market Booms in Macro

This report examines the macroeconomic implications of rising commodity prices and stock market booms in the context of global economic expansion. It discusses appropriate policy responses, utilizing aggregate demand and supply analysis. The report highlights that economic growth, while beneficial, can lead to inflation due to resource misallocation, widening the gap between the rich and poor. Fiscal and monetary policies are explored as potential solutions to manage inflation and promote sustainable economic development. The analysis emphasizes the importance of government intervention through regulatory policies to ensure appropriate resource allocation, manage inflationary pressures, and foster job creation for improved living standards. Concluding that effective macroeconomic management is essential for balancing aggregate demand and supply, promoting resource utilization, and fostering sustainable economic growth in developing economies. Desklib provides a platform for students to access similar solved assignments and study resources.

Global Macroeconomics

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Commodity prices, such as oil, are rising due to continued expansion in new and developing
economies. Discuss the policy response for this issue................................................................3
Stock market boom in advanced economies. Discuss the policy response for this issue...........4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
There is the big transformation in the technology, income, environment and the working
of the people in a new period of fast global economy. Some how, it is related to the economic
development which is unequal and also harmed the environment and they have already halted
owing to climate change in the market. There are developing countries who mus address the
number of connected underlying certain issues in order to attains the long-term economic growth
and inclusion. International competitiveness and minimum productivity, insufficient domestic
resources mobilisation and price mounting debt level and an uncertain manufacturing and the
increasing threat of climate change are just few of them. These are the aspects which contribute
to the macroeconomic equilibrium in the market. It is the aspects which guarantees the overall
expansion is taken into account more thoroughly. There is the huge impact of raid expansion &
the overall developing markets. Rise in the commodity prices that includes oil and stock market
booms in the emerging and advanced economy will further explained in the report and also
analyse the merits or potential policy responses of macroeconomic policy makes with the use of
aggregate demand and supply.
MAIN BODY
Commodity prices, such as oil, are rising due to continued expansion in new and developing
economies. Discuss the policy response for this issue.
Economic growth is the aspects which is concern with the rise in the overall production
of economic products and services from one period to the next year. It is calculated both in real
and nominal terms. Historically, gross national product is being used to quantify the country's
economic growth as a whole. T is defined as the rise in the aggregate production in the economy.
Some how, it helps in gaining the overall production which are not linked with the higher
average marginal productivity that leads to rise the income and prompting the buyers to open
their wallets so that they can spend more and also indicate that they are putting their money for
increasing the quality of life.
As per the Focus Economics' projection for next five year. India is the fastest growing
economies in emerging and developing markets. During past time, India was severely impacted
by the global pandemic COVID-19 and was placed under the strict lock down. Additionally, the

domestic vaccination camp is being organised. Exports and investment are rising day by day and
as per the trade data, it boost the economic development in the upcoming year.
Aggregate demand refers to the was to the total available amount of goods and services it
says that are being used by the consumer or the individual in an economy. Whereas, aggregate
supply refers to the sum total of product and services that are available for selling purpose in the
market. It also identified how aggregate demand and supply interact in the economy.
Furthermore, AD-AS model define as a particular price of a commodity and the output for the
enhancement of aggregate demand and supply in the market. It is also defined as a total available
amount of commodities or the respective demand of product and services in the economy. This
theory is introduced by John Maynard Keynes. In context to the enhancement of the market,
aggregate demand and supply increases the chances of inflation which can be arises due to the
wrong a allocation of money by the people and this results in a situation in which rich people
becoming more richer and poor people becoming more poorer. This can be better understand
with the help of given diagram:
This can be said that with the help of given the aggregated demand and supply curve that is a
significant rise in the income level of the people can influence the overall development of the
economy. It is also stated that rise in the income level can get the situation of inflation due to
which huge inflationary gap is being analyzed by the businesses. The state of inflation is being
arises due to the wrong allocation of money among the different group of people in the society.
Additionally, Inflation refers to the big downfall in the entire purchasing capicity of the
people over a particular period of time. This is analysed that the real and current trends which are

minimizing the overall purchasing capacity of the people due to which they are not able to retain
in the market for long period of time are considered as the quantitative approaches. It is also
important for the economy to effectively analyze the rate of inflation so that they can ensure their
working according to the changing market scenario and results the organization to reach to
higher success and growth in the upcoming year. Inflation can lead to reduce the overall
development of the economy and due do which the country can go in the period of recession
which leads to have unemployment and poor living standards within the economy.
All the regulatory policy is being made by the government of the country that ensures
the appropriate flow of money and the implementation of various approaches in the market so
that they can ensure better working and higher living standards of the people. This also ensures
the follow up of rules and regulation in an appropriate manner by which they can reduce the
inflationary gap in the economy. It also implied in getting better results so that new startups and
development program can be operated on larger scale private entrepreneur can generate more
revenue and profitability. With the help of all such implementations and procedures they can
manage the inflationary gap in the economy. Moreover, the people and the companies who are
granting loans, when the interest rate is not so high by which the government can ensure the
better working and retain themselves in the economy in long run with the aim of generating more
revenue and development. This also help in better operations of government in the right
direction. This particular policy ensures the allocation of resources and the taxes of the
government in an appropriate manner. In order to control the inflation or the inflation
inflationary gap, they can minimize the subsidies which are being offered to the local people so
that they can enjoy the success and growth in the developing economies.
Advantage of fiscal policy, It helps in minimizing or eliminating the factor which is leading to
unemployment in the country. When there is a huge unemployment in the economy, The
government make some of the fiscal policy which helps in increasing the overall accusation and
reducing the overall expenditure with the downfall of the tax rates in the economy. In order to
have the overall demand and the supply in the economy, the manufacturing and the production
company have to introduce more job opportunities and also analyze the fiscal policy so that the
country can have the development and growth in their hands.
Stock market boom in advanced economies.

The given phrase, "advance economy" is defined as the developed economy which are not
under development anymore. It is classified as the among the developed nation which are
enough effective with the technical infrastructure that is being built by the government of the
country. This is the word which is being 1st spoken and used by the International monetary fund
by which they can designate the country as most developed and advanced nation around the
world. When the country is having sufficient income level so that they can ensure the
development in the target market. Thus, it is clear that higher capital income can finance various
industries by which they can ensure effective global financial system in the market.
Furthermore the economy economy is suffering due to the huge inflation that is not meeting the
overall demand of the market. In such cases inflation is the most desirable approach which can
lead to enhance the overall GDP of the country but on the same side, rise in the inflation more
than 3% can have can have a bad influence on the net disposable income of the people. Thus, it
is important to control the inflation in the market so that they can maintain the overall
functionality and there is a rise in the stock market by which the prices of products and services
also increases with the rise in the purchasing capacity of the people that result in boom in the
stock market.
With the help of aggregate supply and demand, It needs to be understand that that increase in the
demand in parallel line with the rise in the income level of the people well and that is showing in
the given diagram.
From the above given diagram it can be said that increase in the purchasing power of the
consumer make change in the aggregate demand and the inflation. In respect to the demand

curve, It shift from D1 to D2, which is indicating the rise in the total spending power of the
people. Somehow this also leads to increase the particular prices of the commodities in the large
market and create difficulty to the consumer to get their favorite products.
When there is a fail in the monetary policy for controlling the overall inflation then it leads to
increase the borrowing rate from the bank and also phase phase minimum supply of money in the
economy. Monetary policy refers to the investment and the entire spending power of the
consumer that leads to have expansionary monetary policy. In these cases, The bank minimized
their interest rate on loan and mortgage so that they can give inspiration to the people to start
their business and contribute to the national economy of the country. Contractionary monetary
policy is the policy which emphasize on the total available amount of money in the country that
can be used by the people and the main motive is to minimize the inflation within the economy.
CONCLUSION
It is concluded from the above report that macroeconomics is the subject matter which ensure
the fulfillment of aggregate demand and supply in the economy as a whole. It also ensure the
utilization of resources in an appropriate manner. In developing economies, the overall
consideration of the market is on the aggregated demand and that can be changed based on the
spending power of the people in the prominent market. It is also suggested to the people to have
overall progression of cash which is the main lookout of the buyer. This helped them to maintain
the inflationary cap within the economy and introduce a various job opportunities to the people
by which they can enhance their living standards and get their favorite products..

REFERENCES
Books and Journals
Chowdhury, A. and Popov, V.V. eds., 2019. Macroeconomic Policies in Countries of the Global
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Chadwick, R.W., 2019. Modeling Political-Military Policy Dynamics in a Global Model.
In Theories, Models, and Simulations in International Relations (pp. 115-132).
Routledge.
Duval, R. and Furceri, D., 2018. The effects of labor and product market reforms: The role of
macroeconomic conditions and policies. IMF Economic Review, 66(1), pp.31-69.
Rout, S.K. and Mallick, H., 2020. International Macroeconomic Activity And Its Interaction:
Evidence From Us, Japan, Germany, China, India And Russia. Global Economy
Journal, 20(02), p.2050008.
Mazier, J., 2020. Global imbalances and macroeconomic adjustments: A three-country SFC
model. In Global Imbalances and Financial Capitalism (pp. 71-106). Routledge.
Hai-Jew, S., 2020. Book Review: Examining Macroeconomic Policies in the Global South. C2C
Digital Magazine, 1(12), p.20.
Boissay, F. and Rungcharoenkitkul, P., 2020. Macroeconomic effects of Covid-19: an early
review (No. 7). Bank for International Settlements.
Kavalevich, L., 2019. Prospects and problems for global macroeconomic development (Doctoral
dissertation, Белорусский государственный экономический университет).