Economic Policy Essay Sample

Macroeconomic policy is one of the critical and big picture of the entire economic performance of a nation. Every government, whether developing or developed develop their macroeconomic policies to particularly use them to influence the economy. The macroeconomic tools used to bring stability on various economic components include monetary policy and fiscal policy. United Kingdom is one of the developed nations in the world, and developing its overall macroeconomic policy of the developed country calls for a critical understanding of the state of the economy. Macroeconomic policy focuses at economic growth, low inflation, as well as low unemployment. The macro economy is also measured to assert its importance and influence in the economy. There are also various actions that the government and other responsible stakeholders undertake to positively influence the economy.
One the macroeconomic policy in the United Kingdom is developed to maintain price stability. Price is one of the critical components in every economy since its persistent increase causes inflation. Inflation affects the economy adversely, and developing a macroeconomic policy on price stabilization is a clear indication of moving towards macroeconomic goal, which is to lower the rate of inflation in the country. Stable prices are very important since it improves global competitiveness, promotes a sustained economy, as well as promoting sustainable economic growth. In developing this policy, there are various factors to be put in place; these include economic circumstance of time, countries institutions, the elasticity of price, and the set of institutions.
The price policy is measured using consumer price index, GDP deflator, as well as producer price indexes. In the United Kingdom it is easy measuring price stability since the market basket keep on changing. The price stability and characteristics is measured using the change in the price of goods and services of the consumer. The PPI also measure the change price of produced goods over time.
The actions that is taken by the government to influence the macroeconomic growth include influencing exchange rate, money supply, aggregate demand, supply of credit, as well as budget deficit. The instruments to be used include the monetary and fiscal policy. The actions taken are meant to ensure that the prices in the economy are very stable and do not fluctuate. The actions taken by the government such as using taxes and government spending are very critical in ensuring that the responsiveness of price is stable and moves towards causing economic development, reducing unemployment, and reducing inflation. It is worth noting that prices have indirect and direct effects on the macroeconomic components.
The expected outcome on the actions taken by the government in the country is mostly focused on the goals that the macroeconomic policy was developed for. In this case, the outcome of the actions is stabilizing prices in the economy; hence, lowering inflation to the point that the economy is in a position to grow. The government of United Kingdom uses the money supply, interest rates, states, open market operation to stabilize the economy. The macroeconomic policy developed in this case specifically aims at ensuring that the increase and decrease of prices in the economy does not adversely affect economic development and growth. The stability of prices exists in an economy when average prices over a period of time. For UK, the issues of price stability entail ensuring that the increase in prices is not more than 2% every year.