Price Stability And Economic Growth

1639 Words 7 Pages
Every government in the world has a goal to its citizens and itself to be economically competitive. The government applies policies and practices, checks and balances, all with a goal of keeping the economy steady and stable. Each government uniquely applies policies it considers best but the desired result is similar for all, a stable economy. To keep the economy steady and non-volatile, the government seeks to achieve price stability and continuous economic growth. The nation’s policy makers carefully consider the business patterns in the country and come up with policies to achieve a stable and steady growth which is sustainable and also help reduce possible negative impact that may result from economic downturns and policy failure (U.S. …show more content…
The United States government also uses such policies in order to maintain a stable and a growing economy. Prize stability is key to the government as it directly affects the economic performance. It is the goal of the US government to achieve full employment and reduce the poverty affected population. Price stabilization can be traced back to the 19th century. During this time, the only stabilization technique was the international gold standard. Under this measure, if a country incurred a deficit in balance of payments, gold would flow out of the said country. To confront the situation, policy makers would increase the interest rates and complicate credit requirements resulting in a fall in income, prices and employment. This in turn would lower importation which would result in improved balance of payments. A country with a surplus in the balance of payments would do the opposite. Gold would flow in the country, interest rates would reduce and consequently, supply of money increased. This resulted in increased importation and decreased exportation thereby reducing the surplus in the balance of payments (Hagen and …show more content…
Keynes argued that unemployment may not end unless the government takes fiscal and monetary policies to control it. At this time however, Keynes believed that fiscal policies would be more effective that monetary policies. Keynes view had much influence on economists and governments and therefore monetary policies were not in much application in the 1940s (Cogley and Sargent). In today’s government, the US applies various monetary and fiscal policies in order to maintain economic stability. The goal still remains to be prize stability, economic growth and full employment for its citizens. Through fiscal policies, the government controls the actions of companies and those of individuals by use of expenditure and taxation decisions. The overall fiscal policy involves the decisions by the government of whether it should spend more or less than it receives (Leeper). The fiscal policy of the United States is achieved through projects by the government which in return stimulates other activity by

Related Documents

Related Topics