Section 3.3 and 3.4 Formative Reflection

In studying Supply-side and Demand-side policies in lessons 3.3 and 3.4, I was able to learn a lot about the effects of government intervention through both fiscal and monetary policies in the economy. A fiscal policy is a policy enacted by the government to alter taxes, spending, and the flow of capital. By raising or lowering taxes while increasing or decreasing¬†government¬†spending, fiscal policies are able to regulate an economy’s demand. Additionally, by controlling the flow of capital in an economy with payouts, a government can regulate an economy’s supply as well. A monetary policy is a policy that alters the interest rates in an economy. This can increase or decrease the consumer’s disposable income, thus regulating the demand within an economy.

Neoclassical economics argues that governments should have limited or no intervention in the economy, and that any intervention only serves to worsen the state of the economy. Contrary to this, Keynesian economics argues that governments should play an active role in regulating an economy’s supply and demand. In the formative examination, I scored myself with an 8/10. I did this feeling I had a strong ¬†understanding of the macroeconomic concepts discussed in class. I was able to identify how demand and supply adjustment were able to create inflation in an economy. In my analysis of the situation however I failed to provide real world examples to link my knowledge of the concepts to the real world. I believe that in the upcoming summative assessment I will provide examples to show how my understand is applicable to the modern world.

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