Question

Macroeconomic policy is about making difficult decisions involving tradeoffs. It is impossible to talk about ‘the best policy. Why ?

(350 words) No written responses please, only typed.

Answer 1

The macroeconomic policy mainly aims to provide a stable economy that is conducive to fostering strong and sustainable economic growth. The main key pillars of macroeconomic policy, monetary policy, and exchange rate policy. It is concerned with the operation of the economy as a whole. It affects the country as a whole.

A tradeoff is where one thing increases and another must decrease, in economics a trade-off is commonly expressed in terms of the opportunity cost of one potential choice and the loss of the best available alternative. Macroeconomic policy is mainly about making very difficult decisions invloving trade-offs. The success of an economy will mainly depend on these decisions taken by the respective governments, and since these policies affect the whole country it is crucial to take the right decision otherwise the result may turn out to be catastrophic. If we think we can have it all, were more likely to end up with nothing. This is how trade-off works, hence it is important to decide where the government focuses its energy and which areas to ignore.

It is nearly impossible to talk about 'the best policy because each policy has its own benefits and disadvantages. But the policy taken can be the best when the policy took is the right one according to the situation.