Question

Identify 3 actions that would take to improve the macro-economy. Use at least 1 fiscal policy action and 1 monetary policy action. Explain the actions, the problem, and how the action will cure the problem. 200 word minimum.

Answer 1

Macro economy consists of aggregate demand representing total demand for the goods and services in the economy. In order to drive the Macro Economy both Monetary and Fiscal factors are important.

Monetary Policy impacts the money supply in an economy, which influences interest rates and the inflation rate. It also impacts the business expansion, net exports, employment.

Decision related to Monetary Policy is taken by mostly central bank of the country in order improve economy if economy is in recession then Central bank will implement contionary Monetary policy where they will decrease the money supply in the economy in order to decrease the demand and bring the economy back to normal. While on other hand if economy is in recession, then Central bank will apply expansionary monetary policy where they will increase the money supply.

Fiscal policy affects aggregate demand through changes in government spending and taxation. Those factors influence employment and household income, which then impact consumer spending and investment.

So, usually government takes the decision of in order control inflation government increase taxes and decrease in public expenditure. That means government will be going for contractionary monetary policy.

Government adapt Expansionary policy in order to improve recession. The government lowers the tax rates to increase aggregate demand and fuel Economic Growth.

Seigniorage is one of the factor in Macro economy

It is the difference between face value of money and cost to produce it. For example it cost 20 dollars to produce 10 dollar face value of money then it's loss for economy because cost of producing money is more than its face value. So, Government need to take care of the fact that the cost should be less then