The most important economic policy today is one that will spur economic growth. The economy has to emerge from the serious problems it is currently engulfed in which include: high unemployment, reduced consumer demand, a shrinking middle class, a large national deficit and the mishaps of the housing estate. Unemployment is a major issue of concern to date. It is critical that a policy that will spur economic growth be implemented because the other variables are largely dependent on the level of economic growth (Von Mises, 2006). A fiscal policy that will increase incomes of household will raise aggregate demand, and then firms will be able to hire more in order to meet this demand.
In the U. S. economy, it’s the policy makers that affect the money supply. The ultimate policy maker, the Fed, is largely responsible for the amount of money in circulation thanks to its control measures. These measures include: setting reserve requirements, buying and selling of Treasury bills, and by adjusting the interest rates (Von Mises, 2006). Consumers will hold money depending on the prevailing conditions set by the Fed. If interest rates are raised for instance, they will prefer to hold less money.
Hungary and Poland were had the most favorable exchange rates as reflected by a closing snapshot of New York trading on October 23, 2012 (The Wall Street Journal, 2012; http://online.wsj.com/mdc/public/page/2_3021-forex.html). The two currencies weakened by 11.9% and 7.8% against the U. S dollar from the previous day’s rates. The implication is that it would be relatively cheap to import from the two countries and at the same time enjoy high prices on exports (Von Mises, 2006). Argentina and Brazil would not be attractive on the same basis because the two currencies strengthened against the U. S. dollar by 10.1% and 8.7% respectively from the trading rates of 22 October 2012. It would be relatively expensive to import from the two countries, while exports would fetch low prices (Von Mises, 2006).
The gold standard imposed some restrictions on the policies applicable among states and enhanced market led adjustments that occurred between national economies. Arguably, these adjustments were natural and automatic working to offset imbalances between countries (Knafo, 2006). In event of these, the gold standard institutionalized the monetary policy. The central banks then came in but under some rules to ensure market-led adjustments. The gold standard regime then paved way for the international monetary system.
References
Knafo, S. (2006). The Gold Standard and the Origins of the Modern International Monetary System. Review of International Political Economy, 13 (1) pp. 78-102
The Wall Street Journal (2012). Exchange Rates: New York Closing Snapshot, Tuesday, October 23, 2012. Retrieved from: http://online.wsj.com/mdc/public/page/2_3021-forex.html
Von Mises, L. (2006). Economic Policy: Thoughts for Today and Tomorrow. Chicago: Gateway.
