Economic Policies To Deal With Inflation

Economic policies to deal with inflation

As in any national territory, there are rules that govern the political system with the reason to increase economic growth and promote a higher level of well -being for the resident population of the Nation, which is why the Government intervenes executing different methodologies or strategies that allowCarry out a better decision -making in economic matters. Decisions should always have a solid basis in economic theory issues and there is a wide variety of economic policy instruments which can modify according to the convenience of Policly Maker so that the objectives are achieved, however its use issees limited due to complexity to use them.

The economist John Maynard Keynes considered economic policy as a necessary means for a country to face economic crises, that is, that state intervention would lead to the stabilization of the economy (Ross, 2012). Until now, Keynesian theory has had some relevance due to its efficacy during the great depression of 1930, so the interest towards the implementation of better founded and regulated economic policies grew simultaneously.

Classification

Economic policy acts in order to achieve its main objectives, such as promoting the increase in national production, maintaining price stability, reaching full employment, preserving balance in the balance of payments, to mention some (Fernández etto the., 2006, p. 102). To do this, make use of all the tools available depending on the type of situation you want to leave.

Notwithstanding the economic policy itself, it has 2 sub-rams which are fractionated according to the instruments required to achieve some specific objective.

Fiscal policy

It focuses on the tax revenues of the State, the decisions of this type of policy affect the level of spending and income that is generated in a given period, generally of one year, also controls the administration of public debt. To carry out these actions, use tax variables and public spending, in this way it is possibleof the public sector in the economy (Fernández et al., 2006, p. 107). Depending on the context, it will be decided whether to increase or decrease the aggregate expense (according to economic theory is the sum of consumption, investment, spending and net exports) and according to the decision will be an expansive or contractive fiscal policy.

Monetary politics

It is an instrument of economic policy through which the amount of money that is available in a country can be modified. One of its main functions is to maintain price stability and not promote inflation. Each of the countries generates the relevant conditions for the ideal execution of the policies designed with the good of adjusting the macroeconomic balance of their country. For example, the Central Bank can influence the money supply of a country, through the discount rate, the cash coefficient and open market operations.

conclusion

Economic policies must have a high level of coherence, coordination and integration of the fiscal and monetary measures that comprise them, to go to the objectives set and always looking for the well -being of the population. 

If a good job of economic policy is achieved, a country may be able to deal with important social and economic problems, such as inflation, poverty and can try to contribute to the economic growth of the country.