Monetary Policy

Interest Rate - Inflation rate -consumer spending

pending

Fiscal Policy
Tax - Government S

Policies for reducing unemployment:

Monetary policy
cutting interest rates to boost AD
Fiscal policy cutting taxes to boost AD
Education and training to help reduce stuctural unemployment
Geographical subsidies to help firms invest in depressed areas
Lower minimum wage to reduce real wage unemployment
More flexible labour markets, to make it easier to hire and fire workers.
Policies to reduce inflation:
Monetary policy Higher interest rates. This increases cost of borrowing and disc
ourages spending. This leads to lower economic growth and lower inflation.
Tight fiscal policy
Higher income tax and / or lower government spending, will r
educe aggregate demand, leading to lower growth and less demand pull inflation
Supply side policies These aim to increase long-term competitiveness, e.g. priva
tisation and deregulation may help reduce costs of business, leading to lower in
flation.