ECONOMIC POLICY/ MACRO ECONOMIC POLICY/ GOVERNMENT POLICY

ECONOMIC POLICY/ MACRO ECONOMIC POLICY/ GOVERNMENT POLICY

     It is the method used by the government to control the economy and to achieve some economic objectives.

Aims of Economic or Macro Economic or Government Policy

Economic Growth

      Economic growth means increase in country’s output and income. It also means increase in real GDP.

It can achieved by increase in public expenditure and reduce in taxes, then income of the people will increase, demand for the goods and services will increase, production will increase, output and income will increase and economic growth also will be high

Full employment

       Full employment means providing employment to the people those who are able and willing to work.

       It also can be achieved by increase in public expenditure and reduce in taxes, then income of the people will increase, demand for the goods and services will increase, production will increase it will provide more employment and the country can achieve full employment

               The above two policies can be achieved by reducing taxes and increase in government expenditure

 

Price Stability

       Price stability means that controlling inflation and its harmful effects

It can be achieved by decreasing public expenditure and increasing taxes, then income of the people will decrease, demand for the goods and services will decrease and price will decrease. It will helps to achieve price stability

Balance of payment stability

       Balance of payment stability means reducing balance of payment deficits.

It also can be achieved by decreasing public expenditure and reducing taxes, then income of the people will decrease, demand for the foreign goods will decrease and imports will reduce, then country can achieve balance of payment stability

Redistribution of income and wealth

       It means equal distribution of income and wealth among the people by imposing high tax up on rich, collect the money and give to poor people as a social security measure

Conflict between Economic Policies

          Some policies are conflicting with others, that is if the government try to achieve some aims then they will loose other, they cannot achieve all the aims at a time.

For example if the government decrease in taxes, then people’s income increases, demand will increase, production will increase, output and income will increase, employment opportunities also will increase, then they can achieve full employment and economic growth. But the increase in income cause to increase in demand for goods and services, increase in price and imports, then we will lose price stability and balance of payment stability