• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Demonstrate how an appropriate use of fiscal policy can achieve a target level of income. If a government can achieve such a target level of income, explain why unemployment has not been at a permanently low level in the UK in the last two decades

Extracts from this document...

Introduction

Demonstrate how an appropriate use of fiscal policy can achieve a target level of income. If a government can achieve such a target level of income, explain why unemployment has not been at a permanently low level in the UK in the last two decades Certain policies are used to tackle the problem of inflation within an economy. One such policy is known as Fiscal policy. The current economic position of an economy is altered by an increase or a decrease of government expenditure. The essay will introduce fiscal policy, and will explain how the influence of this policy can help alter the general level of income of an economy. If over a number of years, government expenditure is greater than income from the national level of taxes, then the economy reaches a level of national debt. The economy will then incur a fiscal policy. ...read more.

Middle

Because of this, there is a need for other policies. Discretionary Fiscal Policies are a way of getting around such problems, which is done by the government changing expenditure levels and taxation rates. Budgets are also introduced by the government, which help with achieving a target level of income. The budgets are a way of changing the levels of tax on goods such as cigarettes, alcoholic drink and petrol. The budgets will also announce increased or decreased government expenditure. Target levels of income are also influenced by discretionary fiscal policies by altering the aggregate supply. National income is increased by a cut in taxes, which therefore means that the general public are more likely to spend their money on investment because the cut left them with higher income. A way of implementing discretional fiscal policy is to reduce taxes on goods. ...read more.

Conclusion

Despite a drop in unemployment levels, inflation was on the rise. Unemployment was not helped by the joining of the European exchange rate mechanism by the Conservative party. Inflation and interest rates fell within 12 months. The UK left the European exchange rate mechanism in 1992. When Labour took power of government in 1997 they nearly abolished all Fiscal policies. Automatic fiscal stabilisers did still exist allowing a rise in deficits during a recession, and a fall during a boom within the economy. Monetary policies have been used by the government over the last two decades to hopefully achieve its' targets. Fiscal policies were scrapped, which seems to have led to a drop in unemployment rates. It is hard for the government to predict the outcomes of it's' actions, and will not therefore know what the policies will lead to. Due to this, the level of unemployment will not stay at one stage and will rise and fall depending on government's approaches to interest rates and inflation. Martin Colclough 0350114 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. What are the government objectives? Explain why each is important and how the government ...

    Retraining can also to help to reduce unemployment by giving people who are part of the way through there working lives different or improved skills and knowledge which are likely to be in demand in the future e.g. computer skills.

  2. Governments set economic objectives - Discuss the relative importance of each of these objectives ...

    In theory, if labour increases, this should lead to economic growth. Increases in labour can result from several factors: 1. Changes in demography - if more young people enter the workforce than leave it, then the size of the workforce increases 2.

  1. Market for alcoholic drinks

    With the help of a supply and demand diagram explain how an increase in the age limit to 21 might affect the market for alcoholic drinks. In figure 1, we can see that in reducing the age limit for drinking to 21, it should in effect reduce the demand for alcoholic drinks.

  2. Explain what the main macroeconomic policy objectives are and why are there problems when ...

    Structural unemployment occurs when people are made unemployed because of capital-labour substitution or when there is a long run decline in demand. Certain industries see seasonal changes in demand and employment, cyclical unemployment is involuntary unemployment due to lack of aggregate demand for goods and services.

  1. How can the government use fiscal policy to achieve its objectives?

    Fiscal policies can be either automatic or discretionary. An aoutomatic fiscal policy is automatically triggered and will stimulate demand in recession and restrain demand during expansion.

  2. Discuss appropriate policy measures that the Singapore government may undertake to increase the net ...

    However, as Singapore is heavily reliant on imported inputs as well as finished goods, it would raise the price of locally made goods. Singapore will then face the danger of inflation due to more expensive imports. Demand-pull inflation occurs when aggregate demand rises through higher demand for exports as well as domestically produced goods.

  1. Evaluate the polices the government should adopt if it wishes to achieve a low ...

    In extract D, it tells us that a problem with Britain's most deprived areas is not necessarily the lack of jobs, but people not being skilled enough to take advantage of nearby labour markets. This is caused by a lack of education and qualifications, if people don't have these, then they usually are unable to get the job.

  2. This paper will begin by detailing the creation of money and then end with ...

    A negative spread between the Discount Rate and the Federal Funds Rate, which occurs when the Discount Rate is lower than the Federal Funds Rate, signals an opportunity for banks and other institutions to borrow money at a lower than normal interest rate.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work