What basic economic and political policies

Markets Economists study trade, production and consumption decisions, such as those that occur in a traditional marketplace. In Virtual Marketsbuyer and seller are not present and trade via intermediates and electronic information. Microeconomics examines how entities, forming a market structureinteract within a market to create a market system.

What basic economic and political policies

Fiscal policyoften tied to Keynesian economicsuses government spending and taxes to guide the economy. The size of the deficit or surplus Tax policy: The taxes used to collect government income.

Government spending on just about any area of government Monetary policy controls the value of currency by lowering the supply of money to control inflation and raising it to stimulate economic growth. It is concerned with the amount of money in circulation and, consequently, interest rates and inflation.

Interest ratesif set by the Government Incomes policies and price controls that aim at imposing non-monetary controls on inflation Reserve requirements which affect the money multiplier Tools and goals[ edit ] Policy is generally directed to achieve particular objectives, like targets for inflationunemploymentor economic growth.

Sometimes other objectives, like military spending or nationalization are important. These are referred to as the policy goals: To achieve these goals, governments use policy tools which are under the control of the government. These generally include the interest rate and money supplytax and government spending, tariffs, exchange rates, labor market regulations, and many other aspects of government.

Selecting tools and goals[ edit ] Government and central banks are limited in the number of goals they can achieve in the short term.

What basic economic and political policies

For instance, there may be pressure on the government to reduce inflation, reduce unemployment, and reduce interest rates while maintaining currency stability. If all of these are selected as goals for the short term, then policy is likely to be incoherent, because a normal consequence of reducing inflation and maintaining currency stability is increasing unemployment and increasing interest rates.

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For instance, unemployment could potentially be reduced by altering laws relating to trade unions or unemployment insuranceas well as by macroeconomic demand-side factors like interest rates.

Discretionary policy vs policy rules[ edit ] For much of the 20th century, governments adopted discretionary policies like demand management designed to correct the business cycle. These typically used fiscal and monetary policy to adjust inflation, output and unemployment.

However, following the stagflation of the spolicymakers began to be attracted to policy rules.

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A discretionary policy is supported because it allows policymakers to respond quickly to events. However, discretionary policy can be subject to dynamic inconsistency: This makes policy non-credible and ultimately ineffective. A rule-based policy can be more credible, because it is more transparent and easier to anticipate.

Examples of rule-based policies are fixed exchange ratesinterest rate rulesthe stability and growth pact and the Golden Rule. Some policy rules can be imposed by external bodies, for instance the Exchange Rate Mechanism for currency. A compromise between strict discretionary and strict rule-based policy is to grant discretionary power to an independent body.

History of stabilization policy

Another type of non-discretionary policy is a set of policies which are imposed by an international body. This can occur for example as a result of intervention by the International Monetary Fund.

Economic policy through history[ edit ] Main article: Economic history The first economic problem was how to gain the resources it needed to be able to perform the functions of an early government: Early governments generally relied on tax in kind and forced labor for their economic resources.

However, with the development of money came the first policy choice. A government could raise money through taxing its citizens. However, it could now also debase the coinage and so increase the money supply.

Early civilizations also made decisions about whether to permit and how to tax trade. Some early civilizations, such as Ptolemaic Egypt adopted a closed currency policy whereby foreign merchants had to exchange their coin for local money.

This effectively levied a very high tariff on foreign trade. By the early modern age, more policy choices had been developed.Political economy is the study of production and trade and their relations with law, planners maximize utility of a representative individual toward examining how political forces affect the choice of economic policies, especially as to distributional conflicts and political institutions.

Chapter Review The central tenet of this school of thought is that government intervention can stabilize the economy Just how important is money? Few would deny that it plays a key role in the economy.
Chapter 4: Political Economy | Essentials of Comparative Politics, 4e : W. W. Norton StudySpace Markets Economists study trade, production and consumption decisions, such as those that occur in a traditional marketplace. Electronic trading brings together buyers and sellers through an electronic trading platform and network to create virtual market places.
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Etymology[ edit ] Originally, political economy meant the study of the conditions under which production or consumption within limited parameters was organized in nation-states. In that way, political economy expanded the emphasis of economics, which comes from the Greek oikos meaning "home" and nomos meaning "law" or "order".

Big {Political} Data. We receive over a million unique answers (and filter out multiple submissions) to our political issues survey per day and categorize the submissions by political affiliation, state, city, and referral website, as well as census data estimates by income, race, education, and household.

Political freedom and escape from tyranny demand that individuals not be unreasonably constrained by government in the crossing of political boundaries. Economic freedom demands the unrestricted movement of human as well as financial capital across national borders.

Political economy is the interdisciplinary study that combines economics, law, and political science in explaining how political institutions, the political environment, and the economic system (capitalist, socialist, mixed) influence each other.

The basic economic and political policies that were pursued by the three conservative republican administrations in the s was enhanced american prosperity. What basic economic and political policies were pursued by the conservative Republican administrations of the s?

2. What were the effects of America's international economic and political isolationism in the s?

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