Macroeconomic Aims
What is Macroeconomic Fails?
"Macroeconomic failures" mean the economy fails to achieve growth, employment, and inflation goals, shown as recession, high unemployment, inflation, stagflation, or ineffective policies.
What is Fiscal Policy?
What is Monetary Policy?
Central banks actions that manage the money supply and interest rates to influence the economy.
What is Inflation?
What is Deflation?
Deflation is the（sustained）fall in overall prices, boosting money’s buying power and often tied to weak demand and economic decline.
What's a core macroeconomic aim?
Economic growth.
How does cutting taxes fight a recession?
People have more money---spend more---boost economy.
Who controls a country's monetary policy?
Central bank.
How does demand-pull inflation start?
Too many people want goods---firms raise prices.
What's a basic mixed challenge in macroeconomic?
Balancing growth and inflation.
Name two macro aims besides growth.
Low unemployment, stable prices.
Risk of too much gov spending in fiscal policy?
Big debt---higher interest payments; may crowed out private investment.
How does lowering interest rates help growth?
Cheaper loans---businesses invest, people spend.
Why is cost-push inflation hard to fix?
Rising raw material costs force firms to raise prices; hard to cut costs fast.
How does global crisis add to mixed challenge?
High debt---spend less on growth.
Why might low unemployment conflict with stable prices?
More jobs---higher wages---firms raise prices(inflation).
How does fiscal policy differ in open vs closed economies?
In open economies, spending may raise imports, hurting trade balance; less in closed.
Risk of raising interest rates too fast?
Crash housing/market; firms can't afford loans---job losses.
What's deflation's danger?
People wait to buy(expect lower prices)---economy slows; debts feel heavier.
How to balance “green goals” with short - term growth?
Invest in green tech but may cost short - term growth.
How does global trade affect"balance of payments"aim?
Too many imports---trade deficit; strong exports help balance.
Why fiscal policy alone can't fix structural unemployment?
Needs worker training(skills mismatch)and labor market reforms, not just spending.
Why monetary policy fails in a "liquidity trap"?
Rates near zero---people hold cash, not spend/invest; policy can't boost demand.
How to choose policies for "stagflation"(high inflation+slow growth)?
Tough!Maybe cut wasteful spending, support supply, while controlling money supply carefully.
Design a policy mix for a country with aging population + low growth + deflation.
Boost immigration, cut interest rates, and use fiscal spending on eldercare + tech innovation to create jobs.