Arg asked in Social ScienceEconomics · 4 weeks ago

Economics: What should a government do to stabilise its economy?

I am currently studying Economics and as a part of this, I am writing evaluations of different articles regarding the marcoeconomic aspect of different nations. In an article about Venezuela, the government introduces a new minimum wage, 60 times the original, and clearly this is an issue as it simply causes unemployment and a shift left in the SRAS curve, which also leads to inflation which Venezuela struggles from.

Clearly a new minimum wage isn't the solution, what should the government do instead, in your opinion?.

Let me know if you want to read the article.

Update:

I'm just wondering whether increasing interest rates would reduce spending from loans and therefore reduce AD and undo some of the pressure on the inflation rate. Would increasing interest rates help?

4 Answers

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  • 4 weeks ago

    The effects would depend on how far above market equilibrium the new minimum wage is. Because inflation has been so excessive in Venezuela the adjustment may be just a reaction to the inflation. 

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  • Oiy
    Lv 5
    4 weeks ago

    It's about time to kill the local currency like in old Reich Germany or Zimbabwe. You're correct, it will create more unemployment and more inflation. And the government does not even pay for it. The minimum wage is paid by the employer.

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  • JuanB
    Lv 7
    4 weeks ago

    How did you come to the conclusion on Venezuela again?  Clearly government changing things by a factor of 60 times is not the answer.  If you want stability you need more long term and gradual implementation policies.  

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  • Anonymous
    4 weeks ago

    An industry, job specific minimum wage for certain industries, and factor in the cocaine trade, and create a population control law.

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