Assignment 2 Chapter 3: The Macroeconomic Environment Analyze the role of government in the macro economy,...

Assignment 2

Chapter 3: The Macroeconomic Environment

Analyze the role of government in the macro economy, including government macroeconomic policies and the objectives on which they are based.

Objectives: -

Controlling inflation
Economic growth,
Reducing unemployment

d. A favorable balance of payments

e. Controlling public borrowing

f. A stable exchange rates

Policies: -

Functions of government in the economies.
Fiscal policies
Monetary policy
Direct controls

*** Follow the assignment guidelines: - (Introduction, Discussion, Review, Suggestion, conclusion & reference)

Solutions

Expert Solution

The role of government us very important in making macro economy as with the help of macroeconomics policy they can control inflation by asking the central bank to increase the interest rate on the borrowed money so that people have less money in their hands to spend also in case of deflation it can do vice versa .

Economic growth objective can also be fulfilled by making investment in those sectors which are necessary for the sustainable growth of an economy.

With the help of good macroeconomics policy they can reduce the level up unemployment in the country by opening more and more employment opportunities so that people can do job according to their capabilities.

If the macroeconomics policy of a government is good then it can convert its unfavorable balance of Payment into favorable balance of payment by making substitute of imported goods and by exporting more and more.

When a country have favorable balance of payment it can save its currency exchange rate in foreign market to depreciate. Also with more favorable balance of payment it will lead to an appreciated exchange rate and. the national currency will become more stable.

For the completion of above stated objective the central government can impose direct control over the importers of certain commodities and with the help of fiscal policy which is related to tax and revenue it can minimize the gap between poor and rich by imposing successive tax rate policy. Also with the help of monetary policy it can control the money supply in the economy .

ekkarill92 answered 1 year ago

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