'IB HL Economics (Macroeconomic Policies) Essay\r'

'deflationary fiscal policies and tight fiscal policies entrust very much be used in conjucture during times in which inflation is on the rise (perhaps a superficial as well much), and when which the regimen aims to apply deflationary coerce to ensure that inflation does not rise too much.\r\nDeflationary fiscal policy is when disposal wasting disease decreases and taxation adjoins. tight monetary policy is when the suppy of bills is decreased and the engage judge are increased.\r\n change magnitude government expenditure will have the ready of limiting the sum up of facilitation the government provides to society to emaciate/invest, pressuring society to decrease society’s aspiration/investment/expenditure. likewise, low supply of money as well as high interest rates will apply a brake on firms and consumers expenditure as they now incur a higher opportunity cost in devour/supplying/investing due to increased interest rates.\r\nInflationary fiscal policy and loose monetary policy however, have the opposite effect on the economy, and this is because they are implemented at times when there is deflationary pressure on the price train (deflation). inflationary fiscal policy will increase government expenditure as well as decrease taxation, and loose monetary policy will increase the supply ofmoney as well as decrease interest rates.\r\nBy change magnitude government expenditure you can now subsidise goods, gruelling be which will have the effect of increasing consumption, as well as provide educational activity schemes to help those who are unemployed find a job. increasing the supply of money increase the amount of flow of money in the economy as there has been an increase in the liquidity in cash. low interest rates attract firms as well as consumers as the opportunity costs to invest/consume have been decreased. for instance, if car contributes were antecedently at 7% during times of inflation (and the government implemented a t ight monetary policy), save via deflationary pressure and central banks implementing a decrease in interest rates the car loan interest rate goes down to 5%, it would be much more economical for you to buy a car when it was at 5% than 7% (increase consumption, which would fall out to an increase in the price level as overall demand increases)\r\n'