3.3.8 Macroeconomic Management

Macroeconomic policies are those that affect the economy as a whole.  Samuelson and Nordhaus, in chapter 21 of Economics, explain both the scope and importance of macroeconomics:

“Thanks to Keynes and his modern successors, we know that in its choice of macroeconomic policies – those affecting the money supply, taxes, and government spending – a nation can speed or slow its economic growth, trim the excesses of price inflation or unemployment from business cycles, or curb large trade surpluses or deficits.” [p. 381]

Macroeconomics is a contested subject.  It is not possible to precisely calculate the impact of policy decisions: there are doubts about the accuracy of both current and historical data, there are disagreements about their interpretation, and the world is continually changing – which makes forecasting difficult.  Difficult judgements must be made in managing a country’s economy:

●  Managing government spending, taxation and borrowing (3.3.8.1);

●  Combating recession with an economic stimulus (3.3.8.2);

●  Inflation, monetarism and the role of central banks (3.3.8.3);

●  Balance of trade and currency exchange rates (3.3.8.4);

●  Macroeconomic policy can affect the balance of power between the major economic actors (3.3.8.5).

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This page is intended to form part of Edition 4 of the Patterns of Power series of books.  An archived copy of it is held at https://www.patternsofpower.org/edition04/338.htm.