1. Section C: Part 2 Government policies to deal with the macroeconomic objectives Chapter 37: Economic policy and policy instruments

2. Group task: Gangnamland has the following characteristics; 3% unemployment 8% inflation Current account deficit of $US 10 billion economic growth 6% GDP 250 billion air pollution & congestion problems Your group are the financial advisors to government. What steps should the government take to improve things in the country? Make notes & report back in 10 minutes

3. Review: What are the macroeconomic objectives? What do governments want to happen with these macroeconomic objectives? How could they achieve these objectives?

4. The government controls these objectives by using policy instruments; taxation rates government expenditure interest rates

5. Govts use policy instruments together in its Economic Policy 1.Fiscal policy: ↑↓ taxation &/or government spending → ↑↓ aggregate demand 2.Monetary policy: ↑↓ interest rates → ↑↓ agg. demand 3.Supply side policies: ↑ productive capacity (supply) in the labour, capital and goods markets These will be looked at in detail in the following chapters * Try Getting started, Q1 & Exam practice