The Macroeconomic policy is made up of two main instruments, which are the Fiscal policy and the monetary policy.
The instruments of policy that are used are there to regulate the economy. They are designed in such a way so that they are able to give the government a level of control of the behaviour of the economy. When markets have failed this will give the government reason to intervene. Once the government have decided to intervene, there is still the problem of selecting the correct method of intervention. This is a question of which policy will be the right instrument to fix the problem in the economy.
The fiscal policy is focused on the control of tax and government expenditure. The rates of tax will change according to surplus budget or deficit. A government will have some surplus budget left over when they have spent less money then they have received through taxation and other sources of government income. …
