Introduction
Monetary policy and fiscal policies are important aspects of the analysis of the U.S economy, as they have a significant impact on the growth of the economy. Moreover, the two types of policy issues are always in active use in the country although the media offers much attention on various economic indicators. Nonetheless, both monetary and fiscal policies have a significant role in the development of an economy and must work together as they cannot exclusively work on their own. Fiscal policy works using tax and spending changes to impact on an economy in diverse ways. However, for any given country, spending is achieved through the government budget, which is mainly funded through taxation (Litvack et al., 2012). A government that runs with a higher budget than the collected revenue is considered to undergo a deficit, which is met by borrowing to gap the difference. Monetary policy impacts well on an economy through monitoring and evaluation of supply and demand of money into the economy.
A change in the Federal Reserve operation has a significant impact on the sum of money available and extent of economic activities in a nation (Glenn & Samad, 2012). Using either of the policy has consequences not only for the U.S but the financial systems worldwide, a feature that influences significant economic activities in different parts of the world such as costs of loans and spending capacity. However, over the recent past, analysts have considered to learn regularly, interpret and report varied activities of different organizations and economic reactions of the same. The situation has therefore forced the Federal Reserve to use the existing speculation in implementing policy adjustment to achieve the desired impact to an economy. The paper aims to highlight the significance of monetary and fiscal policy in the U.S with a comparison to Australia. However, to achieve the desired goal, the study will highlight a significant change in the two policies in the U.S how this change impacts to another economy (Australia), the unemployment situation in the two countries, and actions taken to manage the issues.
Main Body
Change in Monetary and Fiscal Policy
The U.S government has a more extended role in the management of the economy through monitoring of economic activities, maintaining a high employment rate in the country and stabilizing prices. The above goal is achieved through the use of two specific tools, which are the fiscal and monetary policies. With fiscal policy, the management can determine a suitable level of taxes and government spending while the monetary level, on the other hand, manages the supply and demand level of money in the economy. The two tools have received a significant change over the decades with efforts to secure sustainable growth and stable prices. Policy shifts in the U.S took a different direction after the 1930s Great Depression as the government was committed to coming up with a mix of fiscal and monetary policies that would enhance growth and stabilize prices. Over the past, the U.S had a bad reputation about inflation status, and it had to strategize more efforts to help fight recession in the country after the world wars as the unemployment rate in the country was very high (Whalen & Reichling, 2015). However, since 1979, the U.S government focused on implementing effective strategies to manage inflation, an area that has significantly improved. Some of the significant indicators experienced in the early 1990s that evidenced improvement include low unemployment, significant growth, and slow inflation.
Both the U.S and Australian governments utilize monetary policies to achieve various macroeconomic policy objectives such as enhanced employment rate, stable economic growth, and management of inflation. In the U.S, the change in the monetary policy is conducted by the Federal Reserve, which is mandated to ensure that stability in economic development in the country is achieved. However, the fiscal policy is changed or regulated by the Congress and Administration, and the Federal Reserve has no jurisdiction on the same as far as it is concerned.
Exchange Rate Determination
This concept involves the exchange rates of currencies of different countries. For example, as of 4/14/16, one U.S dollar is equivalent to 1.31 Australia dollars. Both Australia and the U.S utilize the floating exchange rate in that the market forces play a critical role in determining the price at which the foreign currency is bought (Libich et al., 2015). Studies have indicated that some of the significant aspects that influence the exchange rate are interest rates prevailing in the market, economic growth and inflation among other issues.
Inflation as a determinant factor in controlling the exchange rate works in various ways to either appreciate or devalue the price of currency. For example, when the American inflation is lower than other parts of the world, the U.S exports will gain an advantage in the market, attracting more demand. Such countries that often experience low inflation rate invite appreciation in the value of their currencies, forcing those wishing to buy such money to pay more. Countries that experience high-interest rates attract more people to bank in such states hence appreciating the value of the state currency. Speculation as another determinant has a significant impact in influencing the exchange rate that is experienced in a given country (Hina & Qayyum, 2015). Competitiveness is another important aspect that affects the exchange rate in a particular country. If the U.S merchandise gains more attractiveness in the market, the currency of the country is expected to gain more value.
A state that has a deficit means that the value of its imports is more than those of exports, a feature that lowers the value of its currency. For example, the 2007 U.S recession was experienced the due to massive deficit of about 7% lowered the value of a country's currency significantly. From the study, it is evident that irrespective of a country, the factors that influence the exchange rate are similar and may either cause the value of currency to appreciate or depreciate.
Unemployment policies and actions to reduce unemployment
Unemployment is a real challenge to most government as it hinders governments from realizing their economic and development goals. However, two significant approaches are used to streamline the situation, and they include demand and supply side policies, which work differently (Totîlca & Bratu, 2014). The demand side policies as used in the U.S help solve the unemployment incidents that result from the recession, while the supply side policies help manage structural unemployment.
Demand side policies
The above systems came into application after the 1991 and 2008 recession in the U.S and Australia and intended to maintain cyclical unemployment in the regions. The federal government applies the fiscal policy as one the approaches to decreasing unemployment, as it increases aggregate demand while at the same time enhances the rate of economic growth (Rudebusch, & Williams, 2016). An example in place was the 2008 recession when the U.S federal government decided to cut down on the taxes while at the same time increased government spending to attract more consumption and economic activities. Increased consumption leads to more aggregate demand hence reducing the rate of unemployment in the country as the number of economic activities increase (Tsen, 2014). The policy, therefore, implied that firms will experience more production hence employ more people in the society, an aspect that impact positively on economic development. According to Keynes, most resources and labor sources are left idle during periods of recession and government intervention to engage them will impact well on reducing the unemployment rate in the country.
Monetary policy as another intervention to reduce unemployment works by lowering the interest rates to encourage more borrowing, an aspect that encourages more investment. The reduction in the interest rates further reduces the exchange rate, making exports competitive.
Supply side policies
The above systems behave in a different manner and seek to overcome the various limitations experienced in the labor market, an aspect that significantly reduces the unemployment rate. Some of the supply side unemployment types include frictional, structural and classical unemployment (Kaltenbrunner, 2015). The U.S government utilizes such policies in reducing unemployment in the country as it offers various programs to educate and train its citizens on how to be productive in the economy. Other significant strategies used in the above case include;
Limiting the power of trade unions
Provision of employment subsidies
Enhancing labor market flexibility
Enhancing geographical mobility
Globalization is an inevitable concept in the current generation, and it is the role of the international community to encourage for collaboration to allow for intergovernmental intervention to solve global challenges. Some of the significant aspects experienced in the recent past that affected the development of the global economy include the 2008 U.S recession, the Pacific El Nino calamities, terrorists' attacks among other issues. Therefore, to counter the various challenges facing the global economic development, policymakers have to set in practical policies that meet the interests of the international community (Oleksiyenko, 2015). For example, China has many structural reforms set in place that is in line with lifting income levels among people, an aspect that enhances the living standards of the people. Another global concern is the Federal's reserves effort to manage the interest rates, an issue that impacts well to the global economy. Many international agencies are involved in the development of policy issues to manage economic development such as IMF to prevent further global crises, which would impact adversely on the emerging economies.
Churches responsibility about caring for believers and the local community
Biblically, the church has various responsibilities to play in caring for believers and the community as a whole and Jesus in his teaching he emphasized for mutual love amid believers (John 13:34). The mutual love explained by Jesus in his teaching meant that believers ought to take care of each other and that they should regularly meet so as to understand one another. His teaching was echoed by Paul in his teaching for believers to do good to everyone including those in church and the community (Galatians 6:10). Churches have a responsibility to guide people and the community in worshipping God. Furthermore, embrace both private and public relation with Him as affirmed by Peter in his teaching that people ought to declare their relationship with God in public (1 Peter 2:9). Another responsibility of the church is to guide believers and the community to abide by the spiritual disciplines as taught by Christ. This, therefore, means that people ought to dedicate their mind, heart and soul in serving God. In Matthew 28:19-20, the Bible indicates another role of the church to make Disciples of Christ who teach others to know more about him.
Churches, therefore, are renowned to have significant contributions to communities, and this is evidenced by economic benefits, social and education such as skill training. The various benefits impact differently to communities, which are experienced in terms of political stability and long-term health of the people. A scholar such as Lewis, (2008) indicates that if it were not for churches, governments would spend a lot of cash in providing the same benefits offered by churches to communities. Churches are nonprofit making organizations and impact positively on economic development as they provide jobs and support to businesses carried out in the local setting. The fact that a church can bring people to live around it from other areas impacts well to the economy, as people wishing to invest in a particular field make decisions based on the availability of such organizations.
Some of the other social benefits resulting from churches include the provision of help to the poor and vulnerable in societies, relationship counseling an aspect that contributes to a moral society. Belonging to a given church increases chances for one to engage in other business activities as such people win the loyalty of employers. Another significant role played by the church is decreasing crimes and deviance in society, a feature that results in more stable and safe communities. The final aspect is that churches offer mental and physical health to an individual, which is beneficial in developing a stable economy free of violence.
Conclusion
Monetary and fiscal policies are two important tools that are used in managing the rate of economic development in a country, and both embrace varied strategies. Monetary policy as used by analysts regulates the money supply in the economy to control some economic activities as well as the unemployment rate. The plan engages more resources and labor into action, an aspect that increases productivity, resulting in economic development. On the other hand, fiscal policy works by changing the taxation policies and government spending in various countries to regulate the rate of economic development. From the study, it is worth appreciating that both the U.S and Australia have experienced a range of policy changes to come up with a suitable mix that will support stable economic development. The study further indicated that exchange rate is influenced by a wide range of factors especially the market forces. However, to manage structural unemployment, there exist various approaches that would effectively manage the labor market, thus leading to reduced unemployment. The paper further appreciates the need for global economic policy collaboration as one of the approaches to counter the global financial crisis that is often experienced internationally. Moreover, the study acknowledges that churches have a fundamental role to play in societies, which can be further categorized as economic and social benefits, hence impacting well on economic development.
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