Question

Group Project for Macroeconomics

Join a group of no more than 4 members. Please find a news story which reflects Government or Central Bank action or policy with regard to fiscal and/or monetary policy, that is, matters of taxation and/ or government spending or matters with regard to monetary policy involving interest rates or the money supply. A supply-side management phenomena in current China may also be a potential area.

In the light of the theory you have learned, please undertake the following:

1. Explain the background economic climate that led to this action or the news discussion of possible action. Clearly explain the objective(s) the government is trying to achieve and explain the specific economic instrument or instruments the government is using (or which are being discussed) to achieve the stated objective.

2. Evaluate the action or planned action in terms of economic theory you have learned, highlighting the expected efficacy of the policy and any effects it might have on other macroeconomic objectives and the effects it might have on consumers and/or businesses.

Clearly explaining the policy objective(s) and explaining links between government actions identified and achieving stated objectives. Critical evaluation of Government policy in terms of economic theory – highlighting impacts, showing winners and losers.

Evidence of ability to source appropriate reference materials and correct acknowledgement of sources. In your responses, you might make use of quality newspaper and magazine articles to present facts and ideas.

You should also make use of references to academic journal articles, supplied readings and text books to justify your conclusions. Back up your conclusions with economic reasoning rather than emotion or political opinion.

Deadline: Before the final examination.

Words limits: 2000 words.

Answer 1

Tradeoff between Monetary policy and Fiscal policy : Achieving the right balance amidst trade war.

The biggest issue been surfaced is US China Trade War, Immigration Laws, US National Debt, Foreign Relations policy  

US and china have great history of trade wars however recent times has been largely due to sanctions been imposed on china by USA.

Recently, USA slpped tarrifs on 40% of chinese goods. which has caused prices of US goods to go up substantially becuase cheap imports fro china have been stopped.USA has also stopped cheap imports of steel and as a result Chinese government too has imposed substantial tarrifs on USA goods.

As a result, there has been currency devaluation in China to make it goods look more cheaper and attractive and has started selling Goods in emerging markets. US goods however have become more costlier and hence sales have decreased.

Chinese government has aggravated trade war by imposing fresh round of tarrifs , however before G20 summit which will be held in 2018, such issues will be resolved.

Since, China has imposed tarrifs we see there has been lack of entry of chinese workrs and visas in USA which has nullified the clear cut winner. Because of trade war, India has managed to export steel and aluminium to US markets and hence has been the greatest beneficiary.

Given the Presidential Power following economic strategies need best case implementation :

Resolution of NAFTA deal with negotiation as well as maintenance of great relationships with South Korea on denuclearization by maintaining an eye on all developments
US China pact and removal of tarriffsby signing of MOU and economic cooperation
Immigration laws been relaxed by allowing H1B for Indians who look to create startups IN UsA and generate more employment
Debt refinancing and additional taxation on corporates with large market Capitalization to decrease debt in short term.
Increasing interest rates to appreciate dollar and control inflation and money supply in market  

References:

Bailey, Martin Neil, What Happened to The Great American Job Machine!? The impact of trade and electronic Offshoring.

Cline, William R 2004. Trade policy and Global Poverty. Washington : Institute for International economics

Goldman Sachs, 2003. Dreaming with BRICS: the path to 2050. Goldman Sachs Global Economics paper 99

Zoelick, Robert B 2001. American Trade Leadership : What is at Stake? Speech before Institute of International Economics washing mton, September 24.

Schott, Jeffrey, 2004. Free trade agreements :US strategy and Priorities. Washington: Institute for International economics