Cyclical fluctuations are common in all the economies of the world and it is the responsibility of governments to strive to keep the economy in a stable condition so as to avoid extreme waves of booms and recessions. This paper advises the government concerning the use of…
An economic cycle comprises several phases viz. recession, recovery and boom. In the recovery phase, individuals and businesses borrow and invest more causing the aggregate demand to rise up which leads to boom or expansionary pressures in the economy. This boom brings with it problems like inflation and high imports etc. In such a situation, the government needs to take some action through various macroeconomic policies for the purpose of stabilisation of economy. Thus, the recessionary pressures enter the economy characterised by weak investment and business slow down (Smith, 2003). The economy displays several peaks and troughs over a cyclical phase (see Fig 1).
The responsibility of government to stabilise the economy leads it to make use of various macroeconomic policies in order to manage the cyclical economic fluctuations. As an advisor to the government, I would like to recommend the use of monetary and fiscal policies for the purpose of curtailing cyclical fluctuations. Macroeconomic policies like monetary and fiscal policies can be utilised by government to control economic fluctuations. Macroeconomic factors like taxation and government spending fall within the realm of fiscal policy whereas inflation, interest rates, exchange rates and other monetary factors are relevant to the monetary policy. Government can control economy by fluctuating interest rates, exchange rates, and the growth of money and credit in the economy (Smith, 2003). Most particularly, changing interest rates on the part of the government affects inflation, supply of money and credit, exchange rates, foreign and domestic investment and business expansions etc. All these factors put a great impact on the cyclical pressures in the economy.
Monetary policy can be utilised in two dimensions under cyclical fluctuations in business. In the case of expansionary pressures or boom in the economy, the ...
Cite this document
(“Economics Essay Example | Topics and Well Written Essays - 1000 words - 5”, n.d.)
Retrieved from https://studentshare.net/miscellaneous/325838-economics
(Economics Essay Example | Topics and Well Written Essays - 1000 Words - 5)
“Economics Essay Example | Topics and Well Written Essays - 1000 Words - 5”, n.d. https://studentshare.net/miscellaneous/325838-economics.
For instance, Adam Smith’s theory of the invisible hand argues that when people engage in business and selling they are governed by the invisible hand of the market that helps regulate prices and ensures that businesses and people act in certain ways. Indeed, the nature of economics is like psychology in that it presents theories of human behavior.
Thus, short-run is the time period that quantity of an input or at least one of the many inputs is fixed while other inputs’ quantities can vary. Long-run on the other hand is that time period where inputs in entirety can be varied. Therefore, there is no specific time that can be taken as fixed or even marked on the dates of the calendar to distinguish short-run from the long-run.
If the quantity demanded of a certain product changes minimally or does not change at all, then that product is said to be a Price Inelastic Good. Consequently, if a product whose price increased and such a change brought forth an abrupt drop in quantity demanded of the same product, the good is said to be Price Elastic.
e that the people of a country would receive the best of every thing that could be education, housing, health services or the other various basic necessities.
Economics has been called and is known as a Social Science one that actually focuses on the subject matter that is
sought to apply a broader theoretical and conceptual tradition of economic thought by placing emphasis on neo-classical synthesis – a combination of neo-classical economics and Keynesian economics.
Conservative economics is based on Milton Friedman’s teachings and
When it come to the economic growth, not only peoples’ income but also many other factors like political freedom, education, health and environment are of greater significance. This piece of research paper defines potential growth
s the above figure illustrates, if there is a supply shock in an economy (such as increase in the price of oil, labor or other costs that increase the cost of doing business), the short run AS curve shifts to the left. The real GDP decreases from Q to Q’ and the price level
These tools enable professional mainstream economists to address various economic issues facing the world. Mainstream economics is about modeling in a way that traditional or heterodox economics is not. It originated from the neoclassical synthesis of the neoclassical
4 Pages(1000 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Economics for FREE!