Macro Economic Policy in both the UK and the Europe area Research Proposal

Macro Economic Policy in both the UK and the Europe area - Research Proposal Example According to the classical point of view, the business cycles are the result of disturbances in the production and spending. The Real Business Cycle theory is the extended version of the classical theory, which sees business cycle as the result of the productivity shocks. According to the Real business cycle theory, the reduction in the productivity at temporary basis creates a declining effect on the real wages, employment level, and output and increase the interest rate and the prices. The RBC theory finds a positive relationship between the business cycle and the level of real wage, prices and the overall productivity level of Labour. On the other hand, the theory asserts a negative relationship between the price level and the business cycle. The anti-cyclical trend of the price level is taken as a failure by many of the critics of the theory. Except the productivity shocks the increase in the Government purchase also increase the employment level, the interest rate, and the price level. Hence the classical model undertakes the study of both fiscal factors and the productivity shocks. Although the fiscal policy can play its part in order to improve employment level and output the classical economists do not support the role of Government action and state that the invisible hand can adjust the market to the most efficient level. In order to understand the practical applications of all these above theories, we will undertake the comparative study of macroeconomic policy in both the UK and the Euro area.... The RBC theory finds a positive relation ship between the business cycle and the level of real wage, prices and the overall productivity level of Labour. On the other hand the theory asserts a negative relation ship between the price level and the business cycle. The anti-cyclical trend of price level is taken as failure by many of the critics of the theory. Except the productivity shocks the increase in the Government purchase also increase the employment level, the interest rate and the price level. Hence the classical model undertake the study of both fiscal factors and the productivity shocks. Although the fiscal policy can play its part in order to improve employment level and output but the classical economists do not support the role of Government action and states that the invisible hand can adjust the market to the most efficient level. In order to understand the practical applications of all these above theories we will undertake the comparative study of macro economic policy in both the UK and the Euro area. 2- Aim: The aim of this research is to examine the role of the Classical, Keynesian and Real Business Cycle theory by undertaking a comparative analysis of the macro economic policy in UK and Europe. 3-Objectives To review the literature about this issue up till now. To improve the presentation of different economic indicators. To help common people understand the importance of macroeconomic policies. To assess and evaluate the gaps in the macroeconomic policies of UK and Europe by implementing the three major theories. Provision of suitable recommendations to undertake improvement in the macroeconomic policy area. Two views about the