Question

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: -

1. Controlling inflation
2. Economic growth,
3. Reducing unemployment

d.   A favorable balance of payments

      e.  Controlling public borrowing

      f.  A stable exchange rates

Policies: -

7. Functions of government in the economies.
8. Fiscal policies
9. Monetary policy
10. Direct controls

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

Answer 1

Role of the Govt. in macroeconomics- Govt. play a number of roles in macroeconomics like control inflation, economic growth, reducing unemployment, favorable balance of payment, controlling fiscal borrowing, and stable exchange rate. Let's discuss these points one by one.

1. Controlling inflation- inflation means when the general level of price of goods and services rises called inflation. with the rise of inflation the value of money reduce. Govt. take a number of steps to manage inflation at a stable rate. On the side of Govt. RBI or central bank of Country take this responsibility to control inflation with monetary policy. Govt. manage it with fiscal policy to reduce the taxes on goods and services that reduce the prices of these goods and services. But RBI controls it to reduce the money supply, by the rise of Bank rate, CRR, SLR, Repo rate, RRR, etc. As the rate of these monetary instruments rises, it reduces the money supply, and the price of goods and services reduces.

2. Economics Growth- Economics growth means rise the real income or output in the economy called economic growth.