Price Stability and "Full" Employment (1 Viewer)

[IceOnFire]

Just one question:

What government policies are used to achieve price stability as well as "full" employment? Otherwise meaning low inflaton and low unemployment.

I was thinking of the current use of contractionary fiscal policy in combination with expansionary monetary policy, coupled with several microeconomic reforms such as Work Chocies.

Can I say that through the use of the contractionary fiscal policy, it has reduced the need to use monetary policy to restrict inflation since monetary policy can dramatically affect the economy once it's used, therefore impacting on our economic growth. Also the contractionary policy has reduced some demand-pull inflationary pressures, even though our economic activities are still going strong due to the trade boom.

I don't think that's right, but meh..

Thanks.

 

[Conspirocy]

thats a pretty difficult question to answer

i would say first of all you should recognise that price stability is referring to low inflation

you would then notice the philips curve relationship between in the short run, suggesting that there is a tradeoff between inflation (or price stability) and unemployment - you could talk about a costless disinflation where the government announces in advanced that they will target inflation as they think the price level is too high - it is only acheivable when the announcement is credible (that means that once inflation has been lowered policy makers wont go back to get some other benefit - such as lower unemployment)

so in australia, currently price stability is being acheived firstly by monetary policy that is targeting the underlying inflation rate to be between 2-3% on average over the course of the economic cycle

you would also say that sensible fiscal policy is needed to not place inflationary pressure on the price level

then you would probably say that currently wages and incomes policy has led to reductions in unemployment - although if all the markers are labor they wont like that so i dunno what to say there

i would suggest you look at improving the full employment capacity of the economy - so like you could argue microeconomic reforms leading to increased productivity and increased productive capacity for the economy - hence a higher rate employment is attainable and sustainable

but obviously that question wants you to mention the philips curve

 

[IceOnFire]

Thanks Conspirocy.

Anyways I have just finished my essay for my assessment, and I am just wondering would anyone, out of the kindness of their heart, read over it and give me a few pointers?

It will be greatly appreciated.

Thanks.

 

[williamc]

^I will.. pm me it. I'd consider it study for me to read it anyway.