Answer to Question #102117 in Macroeconomics for komalpreet kaur

Question

Design an anti- recession stabilisation policy, involving both fiscal and monetary policies
which is consistent with:
(a) A relative decline in the public sector. (3 marks)
(b) Greater income equality (4 marks)
(c) A high rate of economic growth.

Answer 1

a)With a relative decline in the public sector, the following measures can be proposed:

- effective management of state property: privatization, restructuring, etc .;

- analysis and revision of government spending: reducing inefficient, excess spending on the public sector;

- support for public sector enterprises: tax cuts, tax holidays, the provision of subsidies and subsidies, lower interest rates on loans, interest-free loans, the provision of state orders;

-decrease in the share of public debt;

- fight against corruption: return of exported capital back to the country through relief;

effective distribution of income between state entities: smoothing the income of one entity at the expense of another;

-development of infrastructure: roads, construction;

- development of a system of strategic planning and forecasting of income and expenses.

b) - introduction of progressive income rates between segments of the population

- tax benefits for citizens by category;

- support for small businesses: tax cuts, tax holidays, lower interest rates on loans,

- the provision of social transfers to low-income people;

- the injection of a significant part of public resources (that is, government spending) into the creation of human capital: health care, education, professional retraining of personnel.

c) High rates of economic growth can also carry negative phenomena: a systemic collapse of natural resources, overproduction of goods and services and, as a result, a decrease in indicators of subjective satisfaction with life by the population. Therefore, it is necessary to study the potential of a stable, but not growing economy, a model of a steady state economy. What measures can be proposed:

- maintaining healthy ecosystems and livelihoods;

- extraction of renewable resources at a speed not exceeding the speed of their recovery;

- consumption of non-renewable resources at a speed that makes it possible to replace them with renewable analogues before the non-renewable resource is exhausted.

- deposit of waste in the environment at a speed not exceeding the speed of their safe assimilation.

- the movement of investments from the private to the public sector and a change in the structure of the labor market, including a more even distribution of available work and a policy of limiting the population;

- introduction of taxes on emissions;

- measures to deter consumerism;

- reduction of working hours in the paid sector;

- basic income for all, income ceiling for the rich;

- the transition from industrial methods in agriculture to small farms and organic farming;

- development of non-profit organizations, cooperatives and social enterprises;

- determination of effective interest rates on loans and deposits that do not contribute to economic growth.