Macroeconomic Environment: II

Macroeconomic Environment: II

1. IMF

   • Helping developing economies with debt problems
   • International surveillance
   • Lender of last resort
   • Assisting countries with reconstruction
   • Advice on Sovereign debt crises

2. OECD

   • Main forum for the world's leading industrial economies to discuss economic matters
   • membership includes the G7 nations and most Europe states
   • Its members produce about two-thirds of the world's output
   • Concerted efforts

3. WTO

   • attempt to liberalise world trade
   • a forum for discussing trade problems
   • avoiding protectionism

4. Government policy

   • Economic growth
   • Low unemployment
   • Low inflation
   • balance between government spending and income over the medium term (balanced budget)
   • Balance between overseas earnings and expenditure (balanced trade)

5. Economic policy

   • refers to a set of measures designed to affect the economy
   • Classic Keynesian
     • Fiscal policy
       • uses changes in the level of taxation or government spending to influence the economy
     • Monetary policy
       • uses changed in interest rates, and thus the cost of borrowing, to influence the economy

6. Role of the central bank

   • sets interest rates
   • targets for inflation
   • banker to the clearing banks
   • banker to the government
   • manager of the country's foreign reserves
   • lender of last resort
   • European central bank has limited powers