Macroeconomics addresses large-scale economic factors that affect the overall population. Policymakers, therefore, have to make macroeconomic decisions such as setting interest rates and balancing a country's inflation with both its trad💃e and the forei💙gn exchange rate.

Establishing financial conditions that facilitate an increase in private sector investment also helps policymakers to increase economic growth while reducing poverty. Policymakers must take many factors into account when tackling wide problems such as unemployment, inflation, and a country's current 澳洲幸运5官方开奖结果体彩网:gross domestic product (GDP). Below we discus💟s some of the main macroeconomic problems that policy🎉makers face.

Keynesian vs. Classical Economics

Philosophies on how to accomplish growth and a healthy economy vary. 澳洲幸运5官方开奖结果体彩网:Keynesian economic policies✨ recommend that a government run a budget surplus during times of financial prosperity and a deficit during a recession.

澳洲幸运5官方开奖结果体彩网:Classical economic policies take a more hands-off ap🎃proach during a recession, believing that the markets correct themselves when left unimpeded and that excessive government borrowing or intervention negatively affects t🐲he market potential for recovery.

Policymakers, therefore, have to reach some agreement or settlement with one another on what approaches to ﷽t♚ake at any given time.

Taxation

The use of taxation as a macroeconomic tool is a hotly debated topic amongst policymakers since tax rates have a large effect on overall financial conditions and the government's ability to balance a budget.

澳洲幸运5官方开奖结果体彩网:Supply-side economic theories, essentially the opposite of Keynesian theories, argue that higher 🃏taxes pose a barrier to private investment, and therefore hinder the growth that is essential to a healthy e♌conomy. However, lower taxes mean that the government has less money to spend, which potentially increases the deficit due to more government borrowing.

This was seen during the early 1980s when Ronald Reagan cut taxes and increased military spending as a means of stimulating the economy. As a result, the government was required to run a deficit to accommodate the increased spending with less revenue.

Recessions and Depressions

Policymakers always want to avoid a 澳洲幸运5官方开奖结果体彩网:depression, which occurs when there has been an extremely severe recession. A depression typically brings with it increased unemploymen🌸t, increased poverty, reduced credit, a shrinking GDP, and overall economic volatilityඣ.

Reduced investor confidence makes it increasingly difficult to get capital back into the economy to restimulate grow🐼th. Policy changes are often needed in this instance to stabilize the economy and reverse the effects of the prolonged recession.

A famous example is the Great Depression of 1929 in the United States. As a result of the stock market crash and the resulting fallout, Franklin D. Roosevelt and other policymakers created the 澳洲幸运5官方开奖结果体彩网:Federal♉ Deposit Insu❀rance Corporation (FDIC) and the Securities and Exchange Commission (SEC) to protect banking deposits and regulate stock market trading.

Government spending also increased as World War II began, and these changing conditions helped reverse the depression economics of the previous years.

The Bottom Line

Policymakers have a difficult job when it comes to macroeconomics. Economic factors are interrelated in so many ways that a change in one factor can have unintended consequences on multiple others. Policymakers, therefore, have to maintain a fairly delicate balanc𝓀ing act while trying to tip the scales toward economic growth in ways that do not increase overall economic volatility.