The Impact of Macroeconomic Policy on Economic Welfare: An Analysis

This essay delves into the realm of macroeconomic policy, examining its crucial role in shaping economic welfare. It highlights the three pillars of macroeconomic policy: fiscal policy, exchange rate policy, and monetary policy. The discussion centers on how these policies influence economic growth, employment, and living standards. The essay analyzes the government's success in applying these policies, including their impact on poverty reduction and economic stabilization. It acknowledges the use of GDP in evaluating economic performance and also addresses the challenges the government faces, such as stagflation and unemployment. The essay concludes by emphasizing the need for a comprehensive approach to macroeconomic policy, considering all aspects of the nation and devising strategies to address unemployment and inflation. The essay references academic literature to support its arguments.

Running head: MACROEONOMIC POLICY
MACROECONOMIC POLICY
Name of the Student
Name of the University
Author Note

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Introduction
Macroeconomics is a branch of economics that is related to the entire functioning
related to the economy. Policies of macroeconomics are crucial and shape the criteria within
which factor as well as product market operate. There are three pillars of macroeconomic
policy-fiscal policy, the policy of exchange rate and monetary policy. The primary aim of the
essay is to discuss how macroeconomic policy creates economic welfare and how far the
government has been successful by applying the above policy.
Discussion
The government can influence the growth in the economy by fiscal and monetary
policy that are aspects of the macroeconomy. For the economic growth to be encouraged, the
government may reduce the rate of interest and on the other hand, increase financial supply;
however, this might lead to inflation. Through macroeconomic policy, the government can
create more jobs and improve the standards of living that will bring economic welfare in the
nation (Fuchs and Hassan 2016). Through capital expenditure, the government can influence
economic activity. Change in cash rate can increase savings as well as investment behaviour,
personal spending and credit supply. Macroeconomics is essential in evaluating the entire
performance of the economy regarding national income (Hope and Soskice 2016). By
creating employment benefits, stable prices, equal distribution of wealth and others will help
the government to achieve economic welfare.
The government has been quite successful in increasing economic welfare by
applying the above policy. Its policies have been successful in reducing poverty and also
stabilized the economic cycle. The macroeconomic policy encourages investment in private
sector privatizations, liberations in trade, financial as well as banking reforms that helps in
reducing the poverty of the nation. It also promotes stability in the economic cycle by

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creating a balance between domestic demand and output, balance regarding payments,
expenditure, investment as well as savings (Hansen 2018). The government has been
successful in managing the budget policy, creating taxes, deciding the rate of interest and
implementing policies. Macroeconomics has also used GDP that considers the issue of
inflation.
However, the government still faces challenges in tackling the issues of
macroeconomics. The government faces the challenge of stagflation, exchange rate, and
balance of payment. Unemployment still prevails across the world and also faces stagnant
growth. The modern monetary theory considers the issue of taxation, bond issuance, as well
as exchange rates to be less critical (Michell 2019). The same approach is shown to be
reflected in the macroeconomic policy. The government should try to promote fiscal policy
with the help of macroeconomics. The government still has to wait for the GDP as the current
GDP will always have to be an estimate.
Conclusion
Therefore to conclude, it must be noted that though the government has been
successful in mitigating some areas of concern; however, all aspects of the nation should be
considered while implementing the policies of macroeconomics. Diligent effort should be
taken by the government to curb the problem of unemployment. The government should look
after the issue of inflation and devise methods and strategies to cope with the theme of
unemployment. They should reconsider the approaches that are required for effective nation-
building through the policy of macroeconomics.

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References
Fuchs-Schündeln, N. and Hassan, T.A., 2016. Natural experiments in macroeconomics.
In Handbook of Macroeconomics (Vol. 2, pp. 923-1012). Elsevier.
Hansen, A.H., 2018. Monetary theory and fiscal policy. Pickle Partners Publishing.
Hope, D. and Soskice, D., 2016. Growth models, varieties of capitalism, and
macroeconomics. Politics & Society, 44(2), pp.209-226.
Michell, J., 2019. Book review: Mitchell, William, L. Randall Wray and Martin Watts
(2019): Macroeconomics, London, UK (573 pages, Red Globe Press, softcover, ISBN 978-1-
137-61066-9). European Journal of Economics and Economic Policies: Intervention, 16(3),
pp.431-435.