Macroeconomic Policy

  • Created by: Ben
  • Created on: 12-05-13 09:13

Stabilisation Policy

The economy is affected by booms and slumps of the business cycle and it is the governments role to stabilise the peaks and troughs of economic activity.

  • Boom/Recovery - occurs when output is growing, unemployment is falling and incomes are rising.
  • Slump/Recession - occurs when output is falling, unemployment is rising and incomes are also falling.

There are four main objectives of the stabilisation policy:

  • stable prices.
  • balance of payments.
  • full employment.
  • steady economic growth.

Stable prices and balance of payments are closely linked as they are important for a


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