Government Economic Policy - Essay Example

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Government Economic Policy

Governments main objectives of using this type of policies is to stimulate the aggregate demand, reduce inflation, improve a recession, collection of revenue to provide public goods, improve on market failure caused by externalities or even steer the economy to achieve higher growth.
as earlier discussed the main objectives of government policies is to improve on a recession, depression, inflation, solve on market failure caused by positive and negative externalities, collection of government revenue to provide public goods and to stimulate aggregate demand. These policies will also be used in case of a boom in the economy. The policies can be used together to improve a situation or one of them used.
Inflation can be defined as the consistent rise in the general prices of goods for a fairly long period of time, the most used indicator of inflation is the consumer price index. Inflation is caused by demand push according to Keynes; he argued that inflation will exist when the aggregate demand exceeds aggregate supply. The excess demand can be from the real sector or the monetary sector.
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Summary

Economic policies are measures taken by the government to influence the behaviour of an economy, there exist two types of policies that government use to influence the economy and they include the fiscal policy and the monetary policies.
Fiscal policies include taxation and government spending; the monetary policy will include money supply and other measures that influence the amount of money circulating in an economy…
Author : brookehegmann

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