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Concept
Economic policy
Summary
The economy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the economy.
Most factors of economic policy can be divided into either fiscal policy, which deals with government actions regarding taxation and spending, or monetary policy, which deals with central banking actions regarding the money supply and interest rates.
Such policies are often influenced by international institutions like the International Monetary Fund or World Bank as well as political beliefs and the consequent policies of parties.
Almost every aspect of government has an important economic component. A few examples of the kinds of economic policies that exist include:
Macroeconomic stabilization policy, which attempts to keep the money supply growing at a rate that does not result in excessive inflation, and attempts to smooth out the business cycle.
Trade policy, which refers to tariffs, trade agreements and the international institutions that govern them.
Policies designed to create economic growth
Policies related to development economics
Policies dealing with the redistribution of income, property and/or wealth
As well as: regulatory policy, anti-trust policy, industrial policy and technology-based economic development policy
Stabilization policy attempts to stimulate an economy out of recession or constrain the money supply to prevent excessive inflation.
Fiscal policy, often tied to Keynesian economics, uses government spending and taxes to guide the economy.
Fiscal stance: The size of the deficit or surplus
Tax policy: The taxes used to collect government income.
Government spending on just about any area of government
Monetary policy controls the value of currency by lowering the supply of money to control inflation and raising it to stimulate economic growth. It is concerned with the amount of money in circulation and, consequently, interest rates and inflation.
Official source
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