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What?s so important about our Gross Domestic Policy

Posted by admin | Posted in Domestic Policy | Posted on 13-07-2011

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What?s so important about our Gross Domestic Policy

The Gross Domestic Policy runs linear with the business cycle. When the there is a rise in a country’s GDP there is an expansion in that country’s business cycle and when there is a decline in a country’s GDP then that country’s business cycle goes into a recession like it is in our country right now. The economic agencies in charge do this to keep a balance of trade which plays a large part in keeping a country’s financials stable.

There are several government agencies who determine national fiscal policies to stabilize the country’s economy. These agencies deal with tax and interest rates and government spending, in an effort to control the economy. Answering to the Congress the Federal Reserve regulates the supply of money which helps control and keeps down inflation. The Federal Reserve Act sets forth the goals of monetary policy, specifically “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. Financial stability is an important prerequisite for achieving those goals. The Internal Revenue Service or IRS deals with the taxation of the citizens. The IRS is also in charge of setting up the sales taxes for goods and services taking place in America.

When a government agency changes policies it can positively or negatively affect the economy’s production and employment rates. For example, our current government is trying to convert to green energy and will most likely provide subsidies to these businesses which will enable them to employ more people. The increase in demand for these products with help from the government will create more projects for these businesses to take on. The U.S. government may also changes policies such as increase spending on more green products and give tax breaks for businesses who build green products. A bill that passes the Senate can make or break a sector which deals in creating green products.

There are many roles the government bodies play in determining national fiscal policies and they have large effects on the economy’s production and employment. As you can see this also affects the use of Gross Domestic Policy to measure the business cycle.

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