Macroeconomic policy instruments

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  • Created by: brandss
  • Created on: 19-05-16 13:16
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  • Macroeconomic policy instruments
    • Demand management
      • Reflationary policies
        • seek to increase AD
      • Deflationary polices
        • deacrease AD from going ahead of AS
          • otherwise would lead to inflation
          • unsustainable deficit on balance of payments
      • influences lvel of growth (AD), income, employment, inflation and BOP
    • Fiscal policy
      • automatic stabaliser
        • Gov spending and taxation change automatically
          • (high gov spending = little employment therefore cant tax)
          • (high tax = lots of employment so little need for Gov spending
      • discrestionary fiscal polciy
        • deliberate changes to tax and spending
      • use of Gov spending and taxation
    • Monetary policy
      • use of interest rates to control growth and AD
      • quantitative easing to increase lending
      • influencing exchange rate
    • Supply-side policies
      • improving supply potential
      • not able to achieve growth by itself, must had high levels of AD
      • Types of markets to influence
        • product
          • privatisation
          • trade liberisation
        • labour
          • trade union power
          • increased training
          • reduced income tax
          • lower NMW
        • capital
          • de-regulation of financial markets
          • lower corp tax

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