Macroeconomic Policies Made Easy for Students
Macroeconomics and Macroeconomic policies:
Economics is a subject which can be broadly divided into two branches: macroeconomics and microeconomics. Macroeconomics is the branch which concerns the whole economy, and not singular economic entities individual like buyers and sellers. There are certain macroeconomic quantities which can be directly influenced by policies framed by economists and those policies are known as the macroeconomic policies. To name them, the two most important macroeconomic policies are monetary policy and fiscal policy.
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One of the macroeconomic policies the economics students need to focus on is the monetary policy. As the name suggests, monetary policies are regarding the flow of money in the economy. Monetary policies influence the money flow by influencing the operation of the banks, by controlling the lending rates and the rates of interest. The bank rates and reserve requirements/ ratios are set in accordance to monetary policies and this ensures that the economy functions in a desired manner. The policy can be expansive or it can also be restrictive for a economy and the measures are taken in such a way that they cater to the immediate needs of the economy as well as the long term ones.
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Fiscal policy focuses on the budgeting of an economy. Now, everyone knows that a budget is a financial statement created at the beginning of a financial year with the estimated receipts and planned expenses during the year. Fiscal policy affects all the financial or economic activities. Whether certain government expenditures are to be curbed or certain taxes are to be increased are all determined by the fiscal policy. This again can be expansive or restrictive for the economy.
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