Economic Policy

Policy

An organized society; a state as a political entity

Political economy

How politics and the economy interact. Using economic methodology, it analyzes political phenomena

GDP

Value of all goods and services produced in a country in a specific time period

Economic growth

Change in GDP over time

How is economic growth measured?

Using economic performance and access to goods and services

What are the criticisms of economic growth?

It does not consider impacts on the environment

Unemployment

People in working age who are not (self-) employed but are available for work

What are the factors influencing unemployment

Economic growth, technological development, wages

Inflation

The rise in prices of goods and services

What factors influence inflation

Demand and supply, monopolies, protectionist measures, increase in money supply, deficit spending

Fiscal policy

Revenue collection (mainly through taxation) and public spending

What does fiscal policy influence?

Income, wealth, and their distribution

Savings and investment

Aggregate demand

Monetary policy

Money supply and interests rates are key aspects

What are the basic trade-offs in monetary policy

Higher interest rates, lower inflation, but in the short term, more unemployment.

Foster short-term employment by reducing interest rates at the cost of higher inflation

Who is in charge of economic policies?

Central banks however it questions independence

Inequality in economic policies

The level of income or wealth, as such, does not say anything about its distribution.

Inequality raises questions about the fairness and justice of economic policies, their efficiency and their political consequences

The Gini index

A measure of inequality that orders individuals or groups in the population (e.g., by income)