Policy Economics

The formulation of courses of action to bring about desired economic outcomes or to prevent unde-sired occurrences.

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Policy Economics

Applied economics, or policy economics is the application of theories and data to formulate olicies that aim to resolve a specific economic problem or further an economic goal. Economic theories are the foundation of economic policy, as shown in the upper part of Figure 1-1. Economic policy normally is applied to problems after they arise. However, if economic analysis can predict some undesirable event, such as unemployment, inflation, or an increase in poverty, then it may be possible to avoid or moderate that event through economic policy. For example, you may read in the newspaper that the Bank of Canada has reduced interest rates to increase spending and prevent a recession.

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