Policies Implemented to Help Issues (1 Viewer)

[Tommy_69]

Can somebody give me a brief rundown on the policies in which can be used to help each of the economic issues. thanks

 

[sunjet]

micro - correct long term structural problems, such as unemployment and low competitiveness and cad, cost-push inflation (labour market)
macro - fiscal/monetary -> short term to control growth, inflation, unemployment, affects AD to minimise fluctuations in the business cycle.

 

[Tommy_69]

thanks! doesnt microeconomic reforms make unemployment though haha, through structural change. as wages rise employers substitute labour for capital therefore causing unemployment.

 

[sunjet]

thanks! doesnt microeconomic reforms make unemployment though haha, through structural change. as wages rise employers substitute labour for capital therefore causing unemployment.

wages rise according to producitivity.
micro causes unemployment in the short-term as inefficient industries get owned.

 

[sixleadballoons]

What government policy can address the CAD? I didn't think that they could.. but I found something that said that it can do something about it... in one of the other threads I think.

 

[Tommy_69]

um not sure but..... encouraging public savings is one way we can get rid of CAD. Look up the "Twin-deficits hypothesis" someone just asked it in a thread.

 

[Tommy_69]

Oh yeah thats right.

The government can use Domestic Market Operations (DMO) through the RBA. THey can take out a form of expansionary monetary policy to increase the cash rate and therefore stop spending and increase savings within the economy. In the long term this will lower the CAD.

 

[sixleadballoons]

um not sure but..... encouraging public savings is one way we can get rid of CAD. Look up the "Twin-deficits hypothesis" someone just asked it in a thread.

haha thanks- but I don't understand that either! I can't believe the exam is tomorrow...

 

[sixleadballoons]

Oh yeah thats right.

The government can use Domestic Market Operations (DMO) through the RBA. THey can take out a form of expansionary monetary policy to increase the cash rate and therefore stop spending and increase savings within the economy. In the long term this will lower the CAD.

ooohh ok now I get it. Thanks!

 

[ando_88]

Micro reforms aim to improve some of the structual rigidities in the Australian economy to ensure long term sustainable growth. If used correctly micro reforms can improve unemployment, reduce inflation and improve external stability in the long term, to ensure that macro policies can be used purely to stimulate demand without having to worry about other nasties such as inflation.

Policies to reduce the CAD involve anything to improve the level of national saving i.e. compulsory superannuation, fiscal surpluses in recent years... also anything which improves our international competitiveness of exporters, such as micro reform, should improve our CAD.

 

[sixleadballoons]

I've got another question.... Can we refer to the RBA as part of the government? I know they are part of macroeconomic policy, but I have some memory of them being an independant body without political affiliation? Is this true?

 

[sunjet]

They act on behalf of the government, when they say government policies you can use monetary policy, i think it's just assumed.

 

[Haku]

yea, u can. though it sound strange in essays.