TEMA 3 POLITICA ECONOMICA

Economic Policy

The framework and elaboration of economic policy, objectives, and instruments.

General Goals and Setting Objectives

Broad purposes a society aims to achieve, such as material well-being, equality, respect for individual freedoms, solidarity, security, order, and justice.

Economic-Social Objectives

Quantifiable goals derived from general goals, including achieving specific GDP growth rates, reducing unemployment, reducing inflation, internal economic stability, improving income and wealth distribution, and reducing the external deficit.

Instruments

Variables altered by authorities to achieve objectives, serving as means to reach economic and social goals.

Economic Objectives

Goals closely linked to the general economic welfare of the population, including economic growth, full employment, price stability, equitable income distribution, quality of life, and balance of payments equilibrium.

Economic Growth

Achieving sustained production growth rates and expansion in the levels of goods and services production, measured by GDP growth rate and per capita GDP.

Full Employment

Ensuring net job creation, measured by the unemployment rate and the active population.

Inactive Population

Individuals not engaged in the labor force, including rentiers, pensioners, non-job-seeking unemployed, students, homemakers, and disabled individuals.

Employment Data Sources

Surveys like the Active Population Survey (EPA), population census, and registered unemployment data provide information on the labor market.

Price Stability

Maintaining general price levels or low inflation rates, measured by the inflation rate and calculated using the Consumer Price Index (CPI).

Income and Wealth Distribution

Progressive reduction of income disparities among individuals and regions, measured by the Gini index and Lorenz curve.

Quality of Life

Achievements in education, healthcare, demanded goods and services quality, working conditions, and environmental quality.

Balance of Payments Equilibrium

Reducing a country's external deficit, monitored through the balance of payments accounting for economic transactions with foreign entities.

Social Objectives

Non-economic goals focusing on social welfare, including defense, internal and external security, education, health, environment, and foreign aid.

Policy Instruments

Variables that policy makers can use to achieve the objectives set for a specific economic policy. They are the MEANS to achieve economic policy goals.

Endogenous Variables

Variables that are internal to a system or model and are influenced by the system itself.

Exogenous Variables

Variables that are external to a system or model and are not influenced by the system itself.

Monetary Policy

The process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Fiscal Policy

The use of government spending and taxation to influence the economy.

Exchange Rate

The value of one currency for the purpose of conversion to another.

Direct Controls

Policies that directly regulate prices, wages, or quantities of specific goods or services.

Institutional Changes

Modifications to the structure or functioning of institutions within an economy.

Base Monetary Policy

The total amount of a country's money supply, including physical currency, demand deposits, and other liquid assets held by the central bank.

Inflation

The rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power.

Unemployment

The state of being without any work, yet actively seeking employment.

Central Bank

An institution that manages a state's currency, money supply, and interest rates.

Liquidity

The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.

Open Market Operations

The buying and selling of government securities in the open market to expand or contract the amount of money in the banking system.

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window.

Policy Credit

The extension of credit by a central bank to financial institutions.

Eurozone

The group of European Union countries that have adopted the euro as their official currency.

Inflation Control

The primary goal of monetary policy to maintain stable prices and control inflation.

Money Supply

The total amount of money in circulation or in existence in a country.

Aggregate Demand

The total demand for goods and services within an economy at a given overall price level and in a given period.

Public Spending (GP)

Refers to the amount of government expenditure in an economy. An increase in public spending has a similar effect to previous variations, while a reduction in public spending produces the opposite effect.

Tariffs

Taxes imposed on imported or exported goods, serving as a tool for protectionism against foreign competition and generating fiscal revenue for the government.

Quotas

Quantitative restrictions placed on either imports or exports, controlling the flow of goods between countries.

Exchange Rate Policy

Involves the buying and selling of currencies by the Central Bank in the foreign exchange market to influence the exchange rate between currencies.

Depreciation and Appreciation

Depreciation occurs when a currency's value decreases relative to another currency, requiring more of the latter to purchase the former. Appreciation is the opposite scenario.

Devaluation and Revaluation

Terms used in specific cases where a country fixes its currency's exchange rate to another currency, often seen in less developed countries with strong trade ties to a major currency.

Economic Integration

Refers to various forms of economic cooperation among countries, ranging from a free trade area to a political union, with increasing levels of integration.

Direct Control Policies

Measures that involve prohibitions enforced coercively, often seen in environmental policies or regulations related to income distribution.

Income Policies

Policies that regulate wages and income distribution in the labor market, such as setting minimum wages or negotiating collective agreements.

Institutional Changes

Structural reforms that alter decision-making frameworks significantly, like the decision to join a supranational entity such as the European Union.

Taxonomy of Economic Policies

Classification based on criteria like economic orientation, process resolution, quantitative adjustments, qualitative changes, and fundamental reforms, each with specific examples of policy actions.

Complementarity and Contradiction in Policy Objectives

The theoretical relationships between economic policy objectives can be conflicting, complementary, or independent, impacting the achievement of goals like managing unemployment, inflation, production, and international trade division.

Unemployment (PARO)

The state of being without a job, often measured as a percentage of the total workforce.

Inflation

The rate at which the general level of prices for goods and services is rising, leading to a decrease in purchasing power.

Aggregate Demand

The total demand for goods and services within an economy at a given time.