Macro Policy Tradeoffs

Question 1

When it comes to expansionary fiscal and monetary policy, explain the trade-offs that can occur
Start by explaining the positives of it and then the negatives

Answer 1

The positives include high growth law, employment and low income inequality

The negatives are it will cause demand pull inflation
Current account deficit
Government finances will worsen
Increased income inequality and environment impact

Question 2

What are some evaluative points when it comes to the use of expansionary fiscal and monetary policy?

Answer 2

Output gap size
Nature of growth
Type of policy used
Classical view of compatible objectives

Question 3

When it comes to the use of contractionary fiscal and monetary policy, what are the trade-offs remember to include the positives and the negatives?

Answer 3

Positives include low inflation
Improved current account position
Improvement in government finances
Lower income inequality and improved environment

Negatives include
Lower growth
Increase unemployment that cyclical
Reduction in labour productivity

Question 4

What are some evaluative points when it comes to contraction fiscal monetary policy trade-offs?

Answer 4

Depends on output size
Policy used
Laffar curve ideas

Question 5

What are some trade-offs when it comes to supplied side policies list positives and some evaluative points

Answer 5

Leads to increased long run growth
Loan employment
Low inflation
Improved current account position

Evaluation points can include
Depends on the outback gap size
Government finances
Income inequality
Environment trade-offs