The set of government rules and regulations to control or stimulate the aggregate indicators of an economy frames the macroeconomic policy. Aggregate indicators involve national income, money supply, inflation, unemployment rate, growth rate, interest rate and many more. In short, macroeconomic policies are the policies framed to meet these economy-wide goals.
Two main regulatory macroeconomic policies are fiscal policy and monetary policy. Fiscal policy is the macroeconomic policy where the government makes changes in government spending or tax to stimulate growth. Monetary policy deals with changes in the money supply, or in the factors that affect the supply of money in the economy.
Debt management policy and incomes policy, supported by a sound legal framework such as contract law, are some of the other policies designed to modify macroeconomic indicators of the economy.
Key terms
- Goods and Services Tax (GST)
- Goods and Services Tax is a single tax on the supply of goods and services, right from the manufacturer to the consumer.
- Gross Domestic Product (GDP)
- Gross domestic product is the standard measure of the value added created through the production of goods and services in a country during a certain period.
- Open Market Operations (OMO)
- In macroeconomics, an open market operation is an activity by a central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks.