Measuring Economic Health Memo Essay Example | Topics and Well Written Essays - 500 words

Measuring Economic Health Memo - Essay Example Similarly, availability of credit, money, and business investment also play a vital role in turning the business cycle. The difference between actual GDP and potential GDP constitutes GDP gap. If the GDP gap is a positive number, it is known as inflationary gap and is stated as the direct indication of inflation. In contrast, during the times of deflation, the GDP gap shows a negative number and it is called recessionary gap. In the other phases of business cycle, the output gap differs accordingly. In order to stabilize a country’s economy, different governmental agencies always deal with national fiscal policies. A national fiscal policy refers to the way in which a government plans its expenditure and taxation so as to influence the economy. For this purpose, as Ambekar (n.d.) points out, the regulators (governmental agencies) mainly deal with tax, interest rates, and government spending since these factors have a direct impact on nation’s economy. The Federal Reserv e is the main regulator of United States, which largely focuses on the supply of money as it a fruitful method to keep the inflation down. The concerned government agencies will be always in touch with country’s economic trends.