Economic Policy

Governmental Actions: Influencing the Economy

• The primary policies utilized by states to influence economic policy as listed by the text are macroeconomic policies (fiscal and monetary policy), microeconomic policies (regulatory, subsidy, and competition-based policies), tariffs, and non-tariff barriers, all of which may impact the exchange rates of global currencies
• Fiscal policy
  • Aims to vitalize/revitalize a state’s economy through government action, namely through the restructuring of government spending
  • This can be done by editing the national budget and changing tax rates
  • Generally speaking, government spending is increased and tax rates are decreased when a state attempts to “stimulate” the economy, and the inverse is true when attempting to slow economic growth
• Monetary policy
  • Focuses on changing the supply of a given currency in a country, and the amount of money in circulation
  • This is mainly accomplished through working to change interest rates in an attempt to change overarching economic conditions, like countering inflation and unemployment

Multinational Corporations and Economics

• Multinational Corporations have wide-ranging effects on the world both economically and politically.
• Economically speaking, they have significant impacts on international trade (according to page 263 of the text, they account for 50% of such trade) and play an instrumental role in global economic coordination, development, and communication.
  • Their role in economic development specifically can be exemplified through their foreign investments, production of the vast majority of global profits, and their international operations.

The World Trade Organization

• MNC which generally serves to negotiate and determine internationally-accepted rules and regulations surrounding trade
  • This is primarily accomplished through ambassadors representing individual states meeting to discuss economic policy and trade conditions such as tariffs
  • The vast majority of members (specifically those that represent more developed states) have had several disputes with each other
  • This occurs because MDCs tend to have better and more accessible communication technology and more efficient methods of transportation
• Mostly consists of MDCs

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