what is the difference between fiscal policy and mircoeconomic policies (1 Viewer)

[bendon999]

what is the difference between fiscal policy and mircoeconomic policies?

 

[nimssyk]

Fiscal policy is one arm of Macroeconomic policy which is policy that deals with the whole economy, the other is Monetary policy or the manipulation of the Cash rate by the RBA. Macroeconomic policy is mainly to do with management of Aggregate demand. So Fiscal Policy is policy which refers to the Govts revenue (e.g. Taxation) and their expenditure (defence, heath, social security etc) and its effect on Demand

If the Govt wants to increase demand (expansionary policy) they will run budget deficits as they are doing now. If they want to "cool down" the economy they will run Surpluses.

Basically it all comes down to manipulating the effect of G or net Govt spending on AggD

Microeconomic policy is small scale and long term focused compared to macro policy. Its more about fixing structural problems in the economy mainly to do with increasing efficiency and productivity.

Main types of Microeconomic policy atm is

Labour Market Reform
Financial Market Reform
Taxation Reform
Tariff and Protection reform



hope that helps

 

[bendon999]

thanks. helps alot

 

[nimssyk]

No probs

 

[CountVonChocula]

fiscal policy uses the monetary police when the rba changes the rate of inflation

 

[Atlas]

I always just remembered them as this:

Macroeconomic policies: blunt instrument trying to affect demand which affect the entire economy

Microeconomic policies: sharp instrument affecting supply by reforming specific sectors/industries for increased efficiency