Economics - macroeconomics and sustainable development

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Hanna044
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Hey everyone,

I have to write a short essay about which macroeconomic policies could be used to achieve sustainable development.

Could anyone help me with that?
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abbbbbb.
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(Original post by Hanna044)
Hey everyone,

I have to write a short essay about which macroeconomic policies could be used to achieve sustainable development.

Could anyone help me with that?
Hi! Here is what I came up with....

You could start off with supply side policies (i.e. education, allows more productive work force, so increased efficiency, decreased costs per unit, so improves international competitiveness, so may lead to the multiplier effect). But as a counter argument could say that this leads to inflation (draw LRAS diagram shifting outwards). Could also say that supply side policies are expensive (opportunity cost, may burden future generations as how are they going to pay it off?) and have a time lag. May also lead to macroeconomic objectives having conflict.

Could also talk about demand side policies (i.e. monetary and fiscal policies).

Hope this helps!
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Hanna044
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(Original post by abbbbbb.)
Hi! Here is what I came up with....

You could start off with supply side policies (i.e. education, allows more productive work force, so increased efficiency, decreased costs per unit, so improves international competitiveness, so may lead to the multiplier effect). But as a counter argument could say that this leads to inflation (draw LRAS diagram shifting outwards). Could also say that supply side policies are expensive (opportunity cost, may burden future generations as how are they going to pay it off?) and have a time lag. May also lead to macroeconomic objectives having conflict.

Could also talk about demand side policies (i.e. monetary and fiscal policies).

Hope this helps!
Thank you very much
Could you also help me to relate monetary and fiscal policies to sustainable development?

I have literally no idea what to write down for this, as the book does not provide much information and my tutor was not very helpful
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abbbbbb.
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(Original post by Hanna044)
Thank you very much
Could you also help me to relate monetary and fiscal policies to sustainable development?

I have literally no idea what to write down for this, as the book does not provide much information and my tutor was not very helpful
sure! (+ no problem)

So with monetary policies, you could talk about expansionary monetary policy where they decrease interest rates and increase QE. This may lead to an increase in investment (as it is cheaper to borrow) and more consumption. So may lead to AD shifting, which may lead to the positive multiplier effect (as we know that AD= C + I + G + (X-M)). Therefore this may lead to economic growth.
Decreasing interest rates could also lead to a weaker currency too, so WIDEC- link this to international competitiveness.
But then you could say that this also leads to inflation (demonstrated by the diagram) so may not be the most sustainable growth.

Expansionary fiscal policy, increase in government spending and decrease in tax rates. Could say a fall in corporation tax may lead to increased investment, so increased business confidence (could link to animal spirits), may lead to an increase in employment (as labour is a derived demand). WIth government spending, could talk about how this may lead to greater efficiency/productivity, more employment, more tax revenue, increase in discretionary incomes....etc. But I guess this depends on the magnitude of government spending. With corporation tax, depends on how this compares with other countries abroad- talk about how the corporation tax is going to rise to 25% too with this argument.

Hope this makes sense
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Hanna044
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(Original post by abbbbbb.)
sure! (+ no problem)

So with monetary policies, you could talk about expansionary monetary policy where they decrease interest rates and increase QE. This may lead to an increase in investment (as it is cheaper to borrow) and more consumption. So may lead to AD shifting, which may lead to the positive multiplier effect (as we know that AD= C + I + G + (X-M)). Therefore this may lead to economic growth.
Decreasing interest rates could also lead to a weaker currency too, so WIDEC- link this to international competitiveness.
But then you could say that this also leads to inflation (demonstrated by the diagram) so may not be the most sustainable growth.

Expansionary fiscal policy, increase in government spending and decrease in tax rates. Could say a fall in corporation tax may lead to increased investment, so increased business confidence (could link to animal spirits), may lead to an increase in employment (as labour is a derived demand). WIth government spending, could talk about how this may lead to greater efficiency/productivity, more employment, more tax revenue, increase in discretionary incomes....etc. But I guess this depends on the magnitude of government spending. With corporation tax, depends on how this compares with other countries abroad- talk about how the corporation tax is going to rise to 25% too with this argument.

Hope this makes sense
Thank you so much, this really helps me
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abbbbbb.
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(Original post by Hanna044)
Thank you so much, this really helps me
no worries, if you need any more help feel free to message me
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Hanna044
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(Original post by abbbbbb.)
no worries, if you need any more help feel free to message me
Yes I will do that, thank you. Economics is my worst subject at the moment and I don’t want to mess up my assignments for my CAGs
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