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 Unsuitable Macroeconomic Policies Leading to Depression

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Executive Summary

Macroeconomic policy refers to the policy adopted by a country or government consciously in a planned manner to regulate and control its macroeconomic operation further to reach its policy target. This report mainly talks about potential impacts caused by unsuitable macroeconomic policies on economy. After studying European economic history, we can find out the fact that deflation is the reflection of unsuitable macroeconomic policies, which tremendously contributes to depression. At the same time, this paper also points out some serious unsuitable macroeconomic policies carried out in America, which leads to the Great Depression from 1929 to 1933.
Table of Contents
Executive Summary 1
Introduction 1
Deflation Leading to Depression 1
Causes for the Great Depression in America 2
Conclusion 3
Reference list 3

Introduction

As we can see, macroeconomic policies adopted by a government play a vital part in its economic development. This paper mainly makes researches on European deflation and unsuitable macroeconomic policies practiced in America. Through studies on unsuitable macroeconomic policies of policymakers, it is safe to arrive at a conclusion that if a regime is no longer suitable for a country’s development, sometimes even outdated; it is advisable for policymakers to abandon it. Otherwise it will seriously hamper economic development and bring huge damages to the country’s development from many aspects, such as low production, high unemployment, imbalance between import and export, irrational distribution of natural resources as well as social instability. Regarding this, constructive lessons can be learnt from this paper.

Deflation Leading to Depression

Early in the 19th century according to gold standard, the number of issuing bank notes was totally based on the reserve of gold, as a result of which, bank notes, to some extent, became a substitute for gold. (Robert J. Barro and Vittorio Grilli,1994). On account of the fact that the supply of notes at that time was totally bond up with the production of gold. Therefore, the production of gold took place of gold’s supply in a sense. However, the backward technology and limited natural resource casted  a major barrier to the increase of gold’s supply, which further affects the number of notes circulating in the market. As the rising demand for notes caused by vigorous economic momentum, obviously, the outmoded monetary policies is no longer applied to the requirements of the real economy, in the wake of which, deflation came into being. The devastating consequences of deflation involved in many aspects. The purchasing power of customers decreased tremendously due to high unemployment which in turn imposed restriction on the capacity of production in a company. From what have been discussed above, unsuitable macroeconomic policies indeed do great harms to a country’s development.

Causes for the Great Depression in America

The huge losses brought by unsuitable macroeconomic policies evidently displays to us that obsolete regime should not be empl本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。