How government policies can be used to achieve the economic aims?
1. Achieve full employment
↓ corporation tax ⇒ encourage investment
Fiscal Policy
↑ investment on health/education/infrastructure ⇒ ↑employment
Monetary Policy
↓ In Rates ⇒ ↑ availability of credit ⇒ ↑ investment ⇒ ↑ employment
Economic
Planning
Social partners meeting to discuss job creation eg IBEC, ISME
Direct
Intervention
Job creation in government departments and S.S.B’s
Prices and
Incomes policies
Exchange rate
policies
Encourage low wage inflation ⇒ employers can afford to employ more
people
Devaluate the currency makes exports cheaper, ↑ exports, ↑ employment
2. Achieve Sustainable Economic Growth
Fiscal Policy
↓ Corporation tax ⇒ encourage investment and labour ⇒ overall more
attractive investment environment.
↓ VAT/PAYE ⇒ ↑ disposable income ⇒ ↑ consumption etc
Monetary Policy
↓ In Rates ⇒ ↑ availability of credit ⇒ ↑ investment ⇒ ↑ employment ⇒
↑ disposable income ⇒ ↑ consumption etc
Economic
Planning
Engaging in discussions with social partners allows for realistic economic
targets eg The National Development plan
Direct
Intervention
Govt can establish S.S.B’s to produce goods/services that the private
sector are unwilling to produce ↑ employment ⇒ ↑ disposable income ⇒
↑ consumption etc
N/A
Prices and
Incomes policies
Exchange rate
policies
Devaluate the currency makes exports cheaper, ↑ exports, ↑ employment
⇒ ↑ disposable income ⇒ ↑ consumption etc
3. Control of Government Finances
Fiscal Policy
↓ government expenditure and ↓ borrowing ⇒ better control over
national debt
Monetary Policy
↑ taxes ⇒ more government revenue
Lower interest rates on debt repayments
Economic
Planning
Encourage discussion between National Treasury Management Agency and
social partners as an innovative approach to government planning.
Direct
Intervention
Prices and
Incomes policies
Exchange rate
policies
Wage freeze in the public sector
4. Promote Balanced Regional Development
Fiscal Policy
↑ grants/substities to companies who are willing to locate and operate
from less developed areas of the country (West of Ireland)
Monetary Policy
Economic
Planning
Direct
Intervention
Balanced regional development can be achieved through working closely
with the social partners eg The National Spatial Strategy for Ireland 2002 2020
Relocation of government departments and S.S.B’s to less developed areas
of Ireland.
Provide adequate 3rd level education training and education facilities
Prices and
Incomes policies
Exchange rate
policies
5. Improve Infrastructure
Fiscal Policy
↑ expenditure on infrastructure (toll roads, hospitals, schools,
Parks, etc)
Monetary Policy
Economic
The Government can combine with private companies to improve the
Planning
quality of infrastructure available, eg semiprivate hospitals.
Direct
Intervention
The government can come together with private companies in an effort to
provide goods and services (toll roads, waste collection, recycling centers,
etc)
Prices and
Incomes policies
Exchange rate
policies
6. Control price inflation/Price stability
Fiscal Policy
↓ indirect taxes ⇒ ↓ prices of goods/services
↑ direct taxes ⇒ ↓ disposable income ⇒ ↓ consumption
Monetary Policy
↑ Interest rates ⇒ ↓ demand of loans ⇒ ↓ less availability of money ⇒
↓ consumption
Economic
Planning
Negotiating national wage agreements can control ⇒ ↓ disposable income
⇒ ↓ consumption
Direct
Intervention
Prices and
Incomes policies
Price freezes
Wage freeze ↓ disposable income ⇒ ↓ consumption
Exchange rate
policies
7. Maintain state services
Fiscal Policy
↑ expenditure on health, education, social welfare, etc
Provide adequate hospital, schools, housing ⇒ creates employment
↑ taxes to ↑ government revenue to fund state services.
Monetary Policy
Economic
Planning
Direct
Intervention
Creation of jobs in the public sector
Provision of training facilities and 3rd level education.
Prices and
Incomes policies
Exchange rate
policies
8. Even distribution of wealth
Fiscal Policy
Spend tax so that all sectors of society benefit
Provide adequate social welfare
Development of training and education facilities
Monetary Policy
Economic
Planning
Direct
Intervention
Prices and
Incomes policies
Exchange rate
policies
Discussions with social partners – Job bridge scheme
9. Balance of payments equilibrium
Fiscal Policy
↓ VAT ⇒ ↓ Price of exports
↑ grants/subsidies to encourage exports
↑ PAYE ⇒ less disposable income to spend on imports
Monetary Policy
↑ Interest rates ⇒ ↓ money supply ⇒ ↓ availability of credit ⇒↓
disposable income ⇒↓spending on imports
Economic
Planning
Consultation to encourage firms to increase exports eg IBEC
Direct
Intervention
Import substitution
Prices and
Incomes policies
Wage freezes ⇒↓ disposable income ⇒↓spending on imports
Exchange rate
policies
Devaluate the currency makes exports cheaper, ↑ exports
10. Broaden the Tax Base
Fiscal Policy
Lower the thresholds so that lower income earners start paying tax
Additional tax bracket that target high earners
Introduce property tax
Monetary Policy
Economic
Planning
Direct
Intervention
Prices and
Incomes policies
Exchange rate
policies
11. Stabilise the Banking Sector
Fiscal Policy
↑ expenditure on recapitalizing Irish Banks ⇒ instill greater confidence in
consumers
Monetary Policy
Economic
Planning
Direct
Intervention
ECB ↓ Interest rates ⇒ ↓Cost of credit ⇒↑ borrowing ⇒↑
investment/consumption
Pass law that protects Irish consumers in the wake of a banking crisis.
Prices and
Incomes policies
Exchange rate
policies
12. Protect the environment
Fiscal Policy
Investment in Renewable energy
↑ grants/subsidies for environmentally friendly projects
↑ fines for pollution/carbon tax
Monetary Policy
Economic
Planning
Coming together with social partners to promote/discuss long term
environment protection goals.
Direct
Intervention
Promoting environmentally friendly environments within government
departments and SSB’s
Prices and
Incomes policies
Exchange rate
policies