Macroeconomic Policy - Essay Example

Producers buy raw materials, machinery and equipment as well as stores and spare parts for machinery fro trading agencies and consumers buy practically all articles required for their daily use from traders. Goods are produced on a large scale in anticipation of demand. The markets for products are now spread over the length and breadth of the country and even extended to countries across the international borders. Hence direct sale of goods by the producers to the consumers is not possible.

Without the help of traders and merchants engaged in trade it would be impossible for the system of large-scale production to continue. The trader involved in the actual operation of purchasing goods from producers and selling them to consumers. Traders and consumers are interdependent. Trade is of great significance for production as well as consumption of goods. It is through trade that goods produced at particular places are equitably distributed among users. With the help of trade goods are made available to consumers at the time of their need.

It removes the hindrance of persons by bringing together producers and consumers who are widely scattered. Inflation rises due to many reasons. The reason might be political, economical or social that influences overall economy of the country. Economic protectionism also contributes to the rise in inflation. There are two types of economic protectionism. The first protection in trade is represented in establishing a system of rates and tariffs in favour of domestic production and discourages foreign imports.

This kind of protection is desired to encourage establishment of industrial base by saving small and infant industries against the competition of larger and well-established firms in abroad. The second economic protectionism is a post world war -II phenomenon that is related to the proprietorship as businesses by foreign traders and investors. Multinational companies have been set up after world war-II due to immense investments of foreigners.Multinational companies thought that they could evade tariff restrictors by introducing their own branches plants and subsidiaries, which allowed them to go to markets, mobilise resources and capital and get favours with the government.

These kinds of investments have created to the economic nationalism due to expansion of multinational companies. The foreign owned companies could not take central position over economic decisions from their head office from outside. The economists are compelled to demand for bringing out a legislation to oversee the activities and restrain the growth of foreign ownership. International trade brings rich dividends and imposing restrictions to such exchanges will hinder the further improvement and in realising the