Economic policy Objectives
1.	To achieve economic growth
2.	To control inflation
3.	full employment
4.	To achieve a balance between export and import
Economic Planning
Legal system on business
Management of macro economic
Trade barrier to protect domestic industries
Foreign direct investment
Regional policy, example new town, infrastructure, tax incentive, grant etc…

Economic policy	- Fiscal policy; to management aggregate demand 
-	Expenditure, Budget surplus and deficit
-	Revenue (Taxation)
-	Borrowing
Borrowing requirement: public sector net cash requirement (-) or (+)
 Tax function	– encourage or discourage business
-	As a social cost
-	Redistribute income and wealth
-	Foreign competition
-	To stabilize national income
Tax must be Flexibility, Efficient and not destroy economic behavior.
-Direct Tax
- Indirect tax
Monetary Policy – Influence on demand (Intermediate objectives)
	Money supply
	Monetary system
	Interest rate
	Exchange rate
	Credit control
Indicators	- Leading – Advance indication of what will happen to the economic in the future.
		- Coincident- Indication of economic conditions at the same time.
		- Logging- Lags behind the economic.

Inflation makes uncertainty.
Business confidence is depending on lower interest rate.

National income
Demand –demand for capital goods and consumer goods by household, firm and government.
Inflationary gap	-100% employments and no additional resource to production.
- If demand raise, price also rise (inflation)
Deflationary gap	- Unemployment with lower % still exist, if demand rise little or 
  No-change in price and increase production.
Stage-flation		- Unemployment with inflation
Business Cycle
•	Recession; declaiming demand and disinvestment quickly.
•	Depression;	unemployment and low production.
•	Recovery;	output, income, profit, investment and sales begin rise slowly. 
•	Boom;	capacity and labour were fully utilized. There may be bottle neck in industrial. Demand rise and low unemployment.

Recession

Depression

Recovery

Boom

Output

Inflation and real income
	Balance of payment affect
	Uncertainty
	Economic growth
	Consumer price index
	Retail Price index
Cause of inflation;
•	Demand pull
•	Cost push (increase cost of production)
•	Import cost
•	Expectations
•	Excessive Growth in money supply

Unemployment;
Number of unemployed  x 100%
Total workforce

Becoming unemployment.
Redundancies
Lay-offs
Voluntary quitting from a job
Other; school leaver without a job.

Flow out; unemployed people start finding a job.
		Layoff worker re employed
Consequence of unemployment;
•	Loss of output and human resource
•	Inequalities of income
•	Social cost
•	Increase burden of welfare payments
Causes of employment;
•	Real wage employment; because higher minimum wages.
•	Frictional example a lack of knowledge about job opportunities.
•	Seasonal; temporary
•	Structural; long term
•	Technological; long term 
•	Cyclical or demand deficient; because of down turn in economic 

Economic growth	- Real gross national product (GNP) in actual; potential output and Aggregate demand or 
Potential growth; Aggregate supplied, example, land labour and capital, now new technology esp. in productivity resources.
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Balance of payment 
Current account; trade in goods and service, income and transfers.
Capital account; loan or capital to/from government
Financial account; loan or capital to and from NGO

Deficit in balance of payment to rectify
Depreciation of home currency
Restrict import
	Reduce domestic consumption