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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Policy mix:  Equity in the distribution of income


While the operation of all expansionary policies can help to improve equity via better long term employment outcomes, the government uses budgetary policy as the primary weapon to achieve greater equity in the distribution of income.  This occurs primarily via its control over the progressive tax system, the provision of welfare and the multitude of indirect benefits that provide a benefit to lower income earners (see BP and the distribution of income).  


This has been particularly evident over recent budgets, where the Government has introduced a number of initiatives that have been designed with equity in mind, such means testing of family payments and tax cuts that benefit lower to middle income earners. In addition, budgetary policy supply side initiatives, such tax and welfare reform, continue to have an important role to play.  While monetary policy and other aggregate supply policies (such as MRPs) can contribute to better equity outcomes in the longer term, they are not designed to target equity as a goal of policy.  Indeed, they can actually contribute to negative outcomes for equity in the short term.


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