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Macroeconoimc and Microeconomic policies available to achieve sustainable…
Macroeconoimc and Microeconomic policies available to achieve sustainable EG
Economic Growth
An increase in aggregate demand may cause a proportionally larger increase in gross domestic product or national income, known as the multiplier effect
Economic growth can be measured through changes in real gross domestic product
Components of aggregate demand include consumption, business investment, government expenditure and net exports
Phases of the business cycle include boom/peak, expansion, contraction and recession/trough
RBA stimulus comments on variability of output being lower, implies monetary policy supports sustainable economic growth
Limitations of economic policy such as time lags, global influences and political constraints.
Macreconomic policies
Fiscal policy
Federal Government budgets include the use of government spending and taxation
Budget outcomes include surplus, deficit and balanced
Changes to budgetary stances can have an impact on resource use, income distribution and economic activity.
Monetary policy
The purpose of monetary policy is to influence the cost and supply of credit in the economy and adopt flexible inflation targeting 2–3% shown in stimulus
Monetary policy aims to ensure sustainable economic growth, price stability and full employment (see stimulus)
The implementation of monetary policy by the Reserve Bank of Australia involves the setting of the target cash rate.
Macroeconomc policies
The rationale for macroeconomic policies includes stabilising economic growth and achieving inflation of 2–3%
Fiscal and monetary policy are known as counter cyclical tools which help shift the economy out of recession or boom phases of the business cycle
Macroeconomic policies aim to shift aggregate demand curves to the right leading to higher output/production.
Microeconomic policies
The rationale for microeconomic policy includes shifting aggregate supply to the right by targeting individual/industries sectors or components of the economy supporting productivity growth
Microeconomic policy aims to achieve greater levels of technical, dynamic and allocative efficiency within an economy
Microeconomic policies can have positive and negative impacts on individual product and factor markets, individual industries and the economy
Microeconomic policies include regulation and deregulation of product and factor markets
Stimulus on productivity graph shows changes potentially generated by microeconomic policy
The stimulus graph shows that microeconomic policy such as labour market policy has not supported productivity growth since 2022.