Macroeconomic - Government Policies in Reducing Inflation and Unemployment
Unemployment and inflation are factors that have negative effects on the performance of the economy as a whole. Therefore, policies to achieve low and stable price inﬂation, a high and stable level of employment are big macroeconomics issues of our time. This essay focuses on discussing the role of government policy on reducing unemployment and inflation in relation to Keynesian and Monetarist approaches, including examples of impacts of expansionary fiscal and monetary policies on New Zealand economy.
Fiscal policy is a …show more content…
Fiscal and Monetary policies come with their own set of advantages and disadvantages. The most likely argument against its implementation is the substantial lag that accompanies both these policies, for example the time from when the policy has been implemented till the time its impact is felt in the economy. The following section will indicate how the expansionary Fiscal and Monetary Policies impact price stability (inflation rate: 1-3%) and full employment objectives of New Zealand.
Both monetary and fiscal policies have a significant impact on inflation. An Expansionary Monetary policy results in lowering the interest rate (OCR) as