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Macroeconomic Goals, Limitations of policies - Coggle Diagram

- - - - Consequences
        
        Effect on Material SOL
        
        POSITIVE CONSEQUENCE: Higher SOL and poverty alleviation
        
        POSITIVE CONSEQUENCE: Cycle of savings and investment
        
        NEGATIVE CONSEQUENCE: Investment comes at a trade-off with current consumption
        
        NEGATIVE CONSEQUENCE: Widening income gap and structural unemployment - Growth is not always inclusive
        
        Effect on non material SOL
        
        POSITIVE CONSEQUENCE: Increased spending on merit goods
        
        NEGATIVE CONSEQUENCE: Depletion of resources undermines future growth
        
        NEGATIVE CONSEQUENCE: Depletion of resources undermines future growth
        
        POSITIVE CONSEQUENCE: Increased focus on environmental protection and green tech
        
        Versus other goals
        
        Microeconomic
        
        Lead to loss of allocative efficiency
        
        Can enjoy larger tax revenue to allow it to direct more spending on public and merit goods to reduce allocative inefficiency and inequity
        
        Macroeconomic
        
        Inflation and unemployment
        
        Worsening trade balance
    - - Monetary
      - SR cost-cutting measures
      - SS-side to enhance LR growth potential
      - Fiscal
  - - - Command and Control
      - Market-based approach
        
        Hybrid
  - - - Human capital development
      - Progressive tax structure
      - Progressive Wage Model
      - Direct and indirect subsidies for lower-income individuals
        
        GST vouchers / Workfare Income Supplement
      - Price controls
      - Growth that is sustained over a period of time, BROAD-BASED across economic sectors, and creates productive employment opportunities for the majority of a country's population.
- - - - CAUSES
        
        Imported inflation
        
        Negative supply shock
        
        Wage-push inflation
        
        Others
        
        Tax-push inflation
        
        Profit-push inflation
  - - - CAUSES
        
        Government policies
        
        Expansionary monetary policy
        
        Expansionary fiscal policy
        
        Expectations of rising incomes or price level
        
        External environment
        
        Change in tastes and preferences for foreign consumers
        
        High EG rates of trading partners
        
        Depreciation of domestic currency
  - - - Shoe-leather costs
      - Menu costs
    - - Microeconomic
        
        Allocative inefficiency
        
        Redistribution of income
      - Macroeconomic
        
        INTERNAL: Undermines LR EG and future SOL
        
        EXTERNAL
        
        BOT
        
        Capital Flows
        
        Exchange rate
- - - - Erosion of skills and its implication on potential growth
      - On other macroeconomic goals
      - Foregone output
      - Rising inequality and other social costs
      - Decline in investment and its implication on potential growth
      - Worsening of the budget position: loss of tax revenue and increase in government spending
    - - Tackling DD-deficient
        
        Expansionary fiscal policy
        
        Expansionary monetary policy / managed depreciation
        
        SR cost cutting measures
      - Tackling structural
        
        Occupational
        
        Education and training
        
        Education reforms
        
        Geographical
        
        Grants / tax reliefs to encourage firms to set up in areas of UnN
        
        Slow down structural change with protectionism
- - - - Relative inflation rates
      - Exchange rates (MARSHALL-LERNER)
      - Other
    - - Relative growth rates
      - Tastes and preferences
      - Trade restriction by foreign governments
    - - BOT deficit
        
        Indirect
        
        Problems of deficit financing
        
        Running down foreign reserves and undermining exchange rate stability
        
        Direct
        
        SOL
        
        Reduction in AD
        
        Underlying causes
        
        Loss of X competitiveness
        
        Importing capital goods
        
        Strong economic performance
      - BOT surplus
        
        Direct
        
        Macro goals
        
        Current and future SOL
        
        Indirect
        
        Exchange rate
        
        Foreign reserves
        
        Retaliation
        
        Underlying causes
        
        Trade surplus is a sign of strong macro performance if it is driven by X growth, underpinned by economic competitiveness
    - - Trade policies
      - Fiscal policy
      - ER-centered monetary policy
  - - - Causes (What affects it)
        
        Relative interest rate
        
        Anticipation of exchange rate movement
    - - Portfolio investment
      - Direct investment
        
        Market-seeking motive
        
        Efficiency-seeking motive
        
        Strategic asset-seeking
    - - Direct effects
      - Indirect effects