essay on macroeconomic policies

Macro Economic Essays

These are a collection of essays written for my economic blogs.

Exchange Rate Essays

• Effects of a falling Dollar
• Why Dollar keeps falling
• Discuss Policies to Stop the Dollar Falling
• Does Devaluation Cause Inflation?
• Benefits and Costs of Falling Dollar
• Reasons for Falling Dollar
• The Dollar as the World’s Reserve Currency

Economic Growth Essays

• Evaluate Benefits of Economic Growth
• Essays on Recessions
• Causes of Recessions
• Problems of Recovering from a Recession
• What can Increase Long-Run Economic Growth?
• Discuss Effect of a fall in the Savings Ratio

Inflation Essays

• Discuss the Difficulties of Controlling Inflation
• Should the aim of the Government be to Attain Low Inflation?
• Explain What Can Cause a Sustained Increase in the Rate of Inflation
• Reasons for low inflation in the UK
• Inflation Explained
• Difficulties of Inflation targeting
• Hyperinflation

Unemployment Essays

• Explain what is meant by Natural Rate of Unemployment?
• Should the Main Macro Economic Aim of the Government be Full Employment?
• The True Level of Unemployment in the UK
• What explains low inflation and low unemployment in the UK?

Demand Side Policies

• Discuss effect of Expansionary demand-side policies on Balance of Payments and Environment
• Effects of a Falling Stock Market
• How do Mortgage Defaults affect and Economy?
• Discuss the effect of increased Government spending on education
• Phillips Curve – Trade-off between Inflation and Unemployment

Development Economics

• Why Growth may not benefit developing countries
• Does Aid Increase Economic Welfare?
• Problems of Free Trade for Developing Economies

Fiscal Policy

• Will US Economy benefit from Tax Cuts?
• Can Fiscal Policy solve Unemployment?
• Explain Reasons for UK Current Account Deficit
• Benefits of Globalisation for Developing and Developed Countries

Monetary Policy

• Discuss Effects of an Increase in Interest Rates
• How MPC set Interest Rates
• Benefits of High-Interest Rates (and recessions)
• Who Sets interest rates – Markets or Bank of England?

Economic History

• Economics of the 1920s
• What Caused Wall Street Crash of 1929?
• UK economy under Mrs Thatcher
• Economy of the 1970s
• Lawson Boom of the 1980s
• UK recession of 1991
• The great recession 2008-13

General Economic Essays

• The Dismal Science
• Difference Between Economists and Non Economists
• War and Recessions
• The Economics of Fear
• The Economics of Happiness
• Can UK and US avoid Recession?
• 3 Of the Worst Economic Policies
• Overvalued Housing Markets
• What Went Wrong with US Economy?
• Problem with Bailing out financial sector
• Problems of Personal Debt
• Problem of Inflation
• National Debt in the UK
• How To Survive a Recession
• Can A recession be a good thing?

Chinese Economy

• Problems of Chinese Economic Growth
• Should we worry about a strong China
• Chinese Growth and Costs of Growth
• Chinese Interest Rates and Economic Growth

Model essays

• A2 model essays
• AS model essays
• Top 10 Reasons For Studying Economics
• Inflation explained by Victor Borge
• Funny Exam Answers
• Humorous look at Subprime crisis

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• Online Lessons

Macroeconomic Policy Revision (Online Lesson)

Last updated 14 May 2020

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In this online lesson, we draw together key elements based on content from our previous lessons on macroeconomic policy, and consider how policies might interact with each other.

WHAT YOU'LL STUDY IN THIS ONLINE LESSON

• a review of the nature of the macroeconomic policies and macroeconomic objectives
• an overview of how different policies can be used to meet objectives, with a chance to practise writing chains of analysis
• synoptic aspects of macroeconomic policies

Additional teacher guidance is provided at the end of this lesson. Thank you to Peter McGinn and Jon Clark for their contributions to this lesson.

HOW TO USE THIS ONLINE LESSON

Follow along in order of the activities shown below. Some are interactive game-based activities, designed to test your understanding of macroeconomic policies. Others are based on short videos, including activities for you to think about and try at home, as well as some extra worksheet-based activities.

If you would like to download a simple PDF worksheet to accompany the video activities, you can download it here: Macroeconomic Policy Revision . You can print it off and annotate it for your own notes, or make your own notes on a separate piece of paper to add to your school/college file.

ACTIVITY 1: VIDEO - KEY TERM REVISION

In this video, we review the nature of the main types of macroeconomic policy (fiscal, monetary and supply-side) as well as the main macroeconomic objectives.

ACTIVITY 2: GAME - FISCAL AND MONETARY POLICY CONNECTIONS

Have a go at our Connection Wall activity to help you review fiscal and monetary policies in a bit more depth!

ACTIVITY 3: THINKING TASK - TACKLING UNEMPLOYMENT

In this activity, you take on the role of "Minister for Employment". Start by taking a look at this information document , which contains a series of "cards" on pages 3 and 4. Use the information on those cards to help you complete the table on this sheet . You don't need to print out the documents if you don't want to - simple recreate it on your own paper.

Once you have finished, review your completed table: which policies do you think will be most effective?

ACTIVITY 4: VIDEO - CONNECTING POLICIES AND OBJECTIVES

In this video, we explore how the various macroeconomic objectives can be achieved by using a range of macro policies. You can also practise your analytical writing skills in one of the student activities included in the video.

ACTIVITY 5: THINKING TASK - POLICY CONFLICTS

Sometimes, when a government / central bank introduces a macroeconomic policy to improve performance on one macro objective, it can have a detrimental effect on another objective. In this activity, you are presented with a series of economic scenarios. Your task is to suggest a policy that could help to tackle all of the problems in the scenario.

Download the activity sheet here .

ACTIVITY 6: MACRO POLICY ESSAYS

We've prepared two example essays that require students to consider and compare a range of macro policies in their answers.

The first essay title is " Evaluate policies that can be used to reduce the UK’s level of unemployment at the same time as raising the UK’s economic growth rate ." You can download an answer to this essay here .

The second essay title is " Evaluate the view that demand-side policies are more effective than supply-side policies in reducing the inflation rate in the UK." You can download an answer to this essay here .

For each essay:

• underline every technical economics word/phrase that you see: can you give a definition?
• circle every connective word/phrase that you see
• highlight written analysis when a description of a diagram is being given: think about the features of this written analysis
• using a different colour, highlight any examples of application (AO2)
• write a plan for each essay title - you can base it on the answer given, or think about how you would change it

ACTIVITY 7: VIDEO - SYNOPTIC THINKING

Being able to make connections between different parts of your economics course is a really important exam skill, and also just makes you a better economist! In this video, we explore some of the synoptic aspects of macroeconomic policy. Some of the synoptic connections are based on Year 12 content whereas some are more relevant to Year 13 - just have a go and see what you can do! You can always come back to this topic just before your final A level exams.

ACTIVITY 8: MORE SYNOPTIC THINKING

Here are 5 Macroeconomic Policy Synoptic Assessment Mats that you can use to build your knowledge of real-world macroeconomic policy decisions, test your theoretical understanding, and make synoptic connections. You can practice as many of these as you like - ask your teacher how many they would like you to complete. You can check your own answers using the information provided within the resource.

ACTIVITY 9: CROSSWORD - KNOWLEDGE TEST

Practise your knowledge retrieval skills for AO1 using this macro policy revision crossword .

ACTIVITY 10: MULTIPLE CHOICE QUIZ

Finally, review your macro policy knowledge, application and analysis skills by testing yourself in this interactive multiple choice quiz. Let your teacher know how you get on!

ADDITIONAL TEACHER GUIDANCE

This lesson comprises:

• just over 25 minutes of sequenced, guided video activity, spread across 3 videos
• around 30 minutes of student thinking and activity time throughout those videos
• a range of exam skill tasks, including "unpicking" example essays, practising synoptic skills in relation to real-world macro policies from different economies and consideration of policy conflicts
• knowledge retrieval tasks including an interactive "connection wall" game for fiscal and monetary policy, an AO1 crossword ( solutions to which can be found here ) and an interactive MCQ quiz.

We anticipate that the core of the lesson will take around 90 minutes, although the exam skills tasks may take students longer.

• Conflicting Objectives
• Macroeconomic performance
• Fiscal Policy
• Monetary policy
• Supply-side policies

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Monetary and fiscal policies revision quiz.

Quizzes & Activities

UK Productivity Gap Widens

20th October 2014

Do interest rates affect business investment?

17th October 2014

Monetary Policy: Key Factors Affecting Interest Rates

17th August 2014

Supply-side growth, not inflation, is the cure to the debt overhang problem

24th April 2014

Monetary Policy less powerful in recessions

9th October 2013

Managed Floating Exchange Rates

Study Notes

Exchange Rates - Macroeconomic Effects of Currency Fluctuations

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Microeconomics, Macroeconomics and Economic Policy

Essays in Honour of Malcolm Sawyer

• Philip Arestis 0

University of Cambridge, UK University of the Basque Country, Spain

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6877 Accesses

39 Citations

5 Altmetric

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Table of contents (15 chapters)

Front matter, microeconomics, the function of firms: alternative views.

• Nina Shapiro

Industrial Structure and the Macro Economy

• Keith Cowling, Philip R. Tomlinson

Unemployment, Power Relations, and the Quality of Work

• David A. Spencer

The Problem of Young People Not in Employment, Education or Training: Is There a ‘Neet’ Solution?

• John McCombie, Maureen Pike

The Business of Macro Imbalances: Comparing ‘Gluts’ in Savings, Money and Profits

• William Milberg, Lauren Schmitz

Macroeconomics

A critical appraisal of the new consensus macroeconomics.

Philip Arestis

Bringing Together the Horizontalist and the Structuralist Analyses of Endogenous Money

• Giuseppe Fontana

Economic Growth and Income Distribution: Kalecki, the Kaleckians and Their Critics

• Amitava Krishna Dutt

The Influence of Michał Kalecki on Joan Robinson’s Approach to Economics

• G. C. Harcourt, Peter Kriesler

Shared Ideas Amid Mutual Incomprehension: Kalecki and Cambridge

• Jan Toporowski

Economic Policy

Is there a role for active fiscal policies supply-side and demand-side effects of fiscal policies.

• Jesus Ferreiro, Teresa Garcia del Valle, Carmen Gomez, Felipe Serrano

Fiscal Policy and Private Investment in Mexico

• U. Emilio Caballero, G. Julio López

A Keynes-Kalecki Model of Cyclical Growth with Agent-Based Features

• Mark Setterfield, Andrew Budd

Unsurprising to Keynes, Shocking to Economists: The Normalisation of Capital Controls in the Global Financial Crisis

• Ilene Grabel

Regulating Wall Street: Exploring the Political Economy of the Possible

• Gerald Epstein, Robert Pollin

Back Matter

• economic growth
• economic policy
• fiscal policy
• income distribution
• John Maynard Keynes
• macroeconomics
• microeconomics
• political economy
• unemployment

University of Cambridge, UK

University of the basque country, spain.

Book Title : Microeconomics, Macroeconomics and Economic Policy

Book Subtitle : Essays in Honour of Malcolm Sawyer

Editors : Philip Arestis

DOI : https://doi.org/10.1057/9780230313750

Publisher : Palgrave Macmillan London

eBook Packages : Palgrave Economics & Finance Collection , Economics and Finance (R0)

Copyright Information : Palgrave Macmillan, a division of Macmillan Publishers Limited 2011

Hardcover ISBN : 978-0-230-29019-8 Published: 26 July 2011

Softcover ISBN : 978-1-349-33137-6 Published: 01 January 2011

eBook ISBN : 978-0-230-31375-0 Published: 26 July 2011

Edition Number : 1

Number of Pages : XXIV, 296

Topics : Microeconomics , Macroeconomics/Monetary Economics//Financial Economics , Labor Economics , International Relations , Industrial Organization , Political Economy/Economic Systems

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Lessons learned from the breadth of economic policies during the pandemic

The COVID-19 pandemic resulted in the sharpest and most synchronized reduction in global economic activity in history. The U.S. economy experienced a V-shaped recovery of a type not seen in recent recessions. The rapid recovery was due to two factors. First, the recession itself was caused by a shock associated with COVID-19; as that shock retreated—and people learned to better live with the pandemic—the economy was poised to recover quickly, just as it typically does after natural disasters. Second, the policy response protected household incomes and kept many businesses intact so that they were in a position to resume more normal levels of economic activity when it was safe to do so.

Recession Remedies podcast episode: What should we learn from the economic policy response to COVID-19?

Real disposable personal incomes actually rose in 2020 and 2021 as transfer payments from the government vastly exceeded lost incomes from other sources. As a result, poverty, after accounting for taxes and transfers, fell in 2020 to the lowest level since the data series began in 1967. Initially, observers and policymakers worried that a cascade of bankruptcies and defaults could precipitate a financial crisis. But improvements to make the financial system more resilient in the wake of the global financial crisis and the policy response to the COVID-19 crisis quickly addressed potential issues. 

The economy experienced major side effects from the pandemic and associated policy response, most notably the highest inflation rate in 40 years, far outpacing the increase in wages and leading to the largest real wage declines in decades. Ultimately, the economic policy response to the COVID-19 recession should be judged not just by its consequences in the spring of 2020, not what happened over the next two years, but also by the longer-term effects, and whether the response will prove to have contributed to a stronger and more sustainable economy going forward. 

Evidence on the COVID-19 economic policy response  

• The initial fiscal response in the U.S. was large. It waned in mid-2020 and then surged again in late 2020 and early 2021.
• Economic Impact Payments, Unemployment Insurance, forbearance programs on mortgages and student loans, and an enhanced CTC played the largest roles in lifting household finances, while businesses received support largely through grants and subsidized loans.
• Even after the initial substantial fiscal assistance, observers generally expected a much slower economic recovery from the second quarter 2020 trough than actually came to pass.
• The U.S. government incurred substantial debt. Moreover, inflationary pressures and the efforts to moderate those pressures might bring an end to the expansion.
• The U.S. fiscal response appears to have been larger than any other country.

Lessons learned from the breadth of economic policies during the pandemic  

Policymakers should take the lesson from the past two years that vigorous fiscal and monetary policy can boost income for most households and disproportionately for lower-income households and can speed economic recoveries. However, doing too much can have serious downsides that might be difficult to mitigate.

Macroeconomic support for an economy deep in recession with many underused resources can increase output and employment with little effect on inflation. But as the economy gets closer to its capacity, additional macroeconomic support will feed increasingly into inflation instead of improvements in output and employment. Going forward, the magnitude and timing of the response should be improved through more automatic stabilizers, and the targeting of the response should be as well. The good news is such responses can be implemented efficiently if policies are developed in advance of a crisis.

Policymakers should take the lesson from the past two years that vigorous fiscal and monetary policy can boost income for most households and disproportionately for lower-income house-holds and can speed economic recoveries.

It is important to draw lessons not just from what happened, but also from what did not happen during the COVID-19 recession: for example, there was no financial crisis in the United States or worldwide. The initial, robust response by monetary policy-makers was critical to keeping the financial sector on an even keel. Better preparation in the form of more robust and stress-tested balance sheets for banks prior to the recession also helped.

The preexisting social safety net is inadequate in the face of recessions: it is not generous enough and has too many gaps, which is why it needed to be supplemented by policy action both in the Great Recession and to a much greater degree in the COVID-19 recession. Additional automatic stabilizers are likely part of the answer but are unlikely to be sufficient to avoid the need for well-timed and wise discretionary fiscal responses in the future.

It is still not clear what policies would work better in the United States to lessen the impact of a GDP decline on employment and preserve worker attachment to their employers. Job retention schemes were heavily utilized in European countries compared to state-based work sharing programs in the U.S.—these programs should be explored in greater detail for future downturns.

For more information or to speak with the authors, contact:

Marie Wilken

202-540-7738

[email protected]

About the Authors

Wendy edelberg, director – the hamilton project, jason furman, former brookings expert, timothy geithner, president – warburg pincus.

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• 15 April 2024

Revealed: the ten research papers that policy documents cite most

• Dalmeet Singh Chawla 0

Dalmeet Singh Chawla is a freelance science journalist based in London.

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Policymakers often work behind closed doors — but the documents they produce offer clues about the research that influences them. Credit: Stefan Rousseau/Getty

When David Autor co-wrote a paper on how computerization affects job skill demands more than 20 years ago, a journal took 18 months to consider it — only to reject it after review. He went on to submit it to The Quarterly Journal of Economics , which eventually published the work 1 in November 2003.

Autor’s paper is now the third most cited in policy documents worldwide, according to an analysis of data provided exclusively to Nature . It has accumulated around 1,100 citations in policy documents, show figures from the London-based firm Overton (see ‘The most-cited papers in policy’), which maintains a database of more than 12 million policy documents, think-tank papers, white papers and guidelines.

“I thought it was destined to be quite an obscure paper,” recalls Autor, a public-policy scholar and economist at the Massachusetts Institute of Technology in Cambridge. “I’m excited that a lot of people are citing it.”

The most-cited papers in policy

Economics papers dominate the top ten papers that policy documents reference most.

Data from Sage Policy Profiles as of 15 April 2024

The top ten most cited papers in policy documents are dominated by economics research. When economics studies are excluded, a 1997 Nature paper 2 about Earth’s ecosystem services and natural capital is second on the list, with more than 900 policy citations. The paper has also garnered more than 32,000 references from other studies, according to Google Scholar. Other highly cited non-economics studies include works on planetary boundaries, sustainable foods and the future of employment (see ‘Most-cited papers — excluding economics research’).

These lists provide insight into the types of research that politicians pay attention to, but policy citations don’t necessarily imply impact or influence, and Overton’s database has a bias towards documents published in English.

Interdisciplinary impact

Overton usually charges a licence fee to access its citation data. But last year, the firm worked with the London-based publisher Sage to release a free web-based tool that allows any researcher to find out how many times policy documents have cited their papers or mention their names. Overton and Sage said they created the tool, called Sage Policy Profiles, to help researchers to demonstrate the impact or influence their work might be having on policy. This can be useful for researchers during promotion or tenure interviews and in grant applications.

Autor thinks his study stands out because his paper was different from what other economists were writing at the time. It suggested that ‘middle-skill’ work, typically done in offices or factories by people who haven’t attended university, was going to be largely automated, leaving workers with either highly skilled jobs or manual work. “It has stood the test of time,” he says, “and it got people to focus on what I think is the right problem.” That topic is just as relevant today, Autor says, especially with the rise of artificial intelligence.

Most-cited papers — excluding economics research

When economics studies are excluded, the research papers that policy documents most commonly reference cover topics including climate change and nutrition.

Walter Willett, an epidemiologist and food scientist at the Harvard T.H. Chan School of Public Health in Boston, Massachusetts, thinks that interdisciplinary teams are most likely to gain a lot of policy citations. He co-authored a paper on the list of most cited non-economics studies: a 2019 work 3 that was part of a Lancet commission to investigate how to feed the global population a healthy and environmentally sustainable diet by 2050 and has accumulated more than 600 policy citations.

“I think it had an impact because it was clearly a multidisciplinary effort,” says Willett. The work was co-authored by 37 scientists from 17 countries. The team included researchers from disciplines including food science, health metrics, climate change, ecology and evolution and bioethics. “None of us could have done this on our own. It really did require working with people outside our fields.”

Sverker Sörlin, an environmental historian at the KTH Royal Institute of Technology in Stockholm, agrees that papers with a diverse set of authors often attract more policy citations. “It’s the combined effect that is often the key to getting more influence,” he says.

Has your research influenced policy? Use this free tool to check

Sörlin co-authored two papers in the list of top ten non-economics papers. One of those is a 2015 Science paper 4 on planetary boundaries — a concept defining the environmental limits in which humanity can develop and thrive — which has attracted more than 750 policy citations. Sörlin thinks one reason it has been popular is that it’s a sequel to a 2009 Nature paper 5 he co-authored on the same topic, which has been cited by policy documents 575 times.

Although policy citations don’t necessarily imply influence, Willett has seen evidence that his paper is prompting changes in policy. He points to Denmark as an example, noting that the nation is reformatting its dietary guidelines in line with the study’s recommendations. “I certainly can’t say that this document is the only thing that’s changing their guidelines,” he says. But “this gave it the support and credibility that allowed them to go forward”.

Broad brush

Peter Gluckman, who was the chief science adviser to the prime minister of New Zealand between 2009 and 2018, is not surprised by the lists. He expects policymakers to refer to broad-brush papers rather than those reporting on incremental advances in a field.

Gluckman, a paediatrician and biomedical scientist at the University of Auckland in New Zealand, notes that it’s important to consider the context in which papers are being cited, because studies reporting controversial findings sometimes attract many citations. He also warns that the list is probably not comprehensive: many policy papers are not easily accessible to tools such as Overton, which uses text mining to compile data, and so will not be included in the database.

The top 100 papers

“The thing that worries me most is the age of the papers that are involved,” Gluckman says. “Does that tell us something about just the way the analysis is done or that relatively few papers get heavily used in policymaking?”

Gluckman says it’s strange that some recent work on climate change, food security, social cohesion and similar areas hasn’t made it to the non-economics list. “Maybe it’s just because they’re not being referred to,” he says, or perhaps that work is cited, in turn, in the broad-scope papers that are most heavily referenced in policy documents.

As for Sage Policy Profiles, Gluckman says it’s always useful to get an idea of which studies are attracting attention from policymakers, but he notes that studies often take years to influence policy. “Yet the average academic is trying to make a claim here and now that their current work is having an impact,” he adds. “So there’s a disconnect there.”

Willett thinks policy citations are probably more important than scholarly citations in other papers. “In the end, we don’t want this to just sit on an academic shelf.”

doi: https://doi.org/10.1038/d41586-024-00660-1

Autor, D. H., Levy, F. & Murnane, R. J. Q. J. Econ. 118 , 1279–1333 (2003).

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Willett, W. et al. Lancet 393 , 447–492 (2019).

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Bank Runs, Fragility, and Regulation

We examine banking regulation in a macroeconomic model of bank runs. We construct a general equilibrium model where banks may default because of fundamental or self-fulfilling runs. With only fundamental defaults, we show that the competitive equilibrium is constrained efficient. However, when banks are vulnerable to runs, banks’ leverage decisions are not ex-ante optimal: individual banks do not internalize that higher leverage makes other banks more vulnerable. The theory calls for introducing minimum capital requirements, even in the absence of bailouts.

The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis, the Federal Reserve System, or the National Bureau of Economic Research.

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Macroeconomic Policies in Australia Analytical Essay

Introduction, the experience of the australian economy over the last 10-15 years, trends in australian economic growth, australian unemployment rate trend, australian inflation rate trend, challenges encountered by australian policy makers, targets and instruments in macroeconomic policy, application of economic theories learnt, references list.

The world today is a global village since the economic policies applied on one end of the world have an impact on other economies on the other end. The economic conditions have also become so dynamic that the policy makers are finding it hard to determine the appropriate policy measures (Conrad, 2009). There has been recession within the last ten to fifteen years that have adversely affected many economies. However, those economies that had the appropriate policies in place experienced a small impact only. Australian economy has had mixed results in the last10 to years, which can be shown by examining its macro economic policies and macroeconomic indicators (Department of Foreign Affairs and Trade, n.d).

The four main macro-economic indicators in any given economy are unemployment rate, gross domestic product, inflation rate and the level of interest rates. Microeconomic policies are mainly used for several purposes such as to attain stable prices, full employment and register economic growth among other reasons. The Australian economy has been varying for the last 10-15 years due to economic changes within the country or in the global economy. The macroeconomic indicators as explained below can show this.

Economic growth refers to the rate at which the national income of a given economy is growing, whereby national income refers to gross domestic product (Adelman, 1961).

The graph below shows that the Australia gross domestic product has been experiencing an increasing trend. Between 1998 and 2001, the GDP was stable. However, in 2002, there was a decrease in growth, which was followed by an increasing growth up to 2008. There was a slight drop in 2010. According to ABS, Australia has had an average GDP of $22.44 billion from 1965 to 2010.

In 2008, the GDP reached its record high of $1015.22 billion. In the same period of 2008-2009, the global economy was experiencing recession in which many economies were hard hit. This is a clear indicator of how stable the Australian economy has become, because during that recession most countries experienced a negative economic growth.

Source: (Trading Economics, n.d)

The Unemployed refers to those people who are jobless but are able to work and are actively seeking for employment. It is always given as a percentage of an economy’s labour force (Hughes & Perlman, 1984). The graph below shows a significant drop in unemployment levels for the last ten years. In the period before 1998, the country had very high unemployment rates.

For instance, the country had the highest unemployment rate of 10.90% in December of 1992. However, since 1998 the Australian economy has experienced a decreasing unemployment rate, although there was a slight increase between 2001 and 2002. The unemployment rate was at its record lowest of 4% in 2008, which was followed by a slight increase in 2009 to 2010 (Australian Bureau of Statistics, 2005).

Inflation refers to a sustained rise in the price levels within an economy (Jupp, 2001). Inflation rate is calculated by finding the percentage change in price levels of a given period. While measuring inflation, the two parameters that are utilized in most cases are the GDP inflator and the Consumer Price Index (CPI). Inflation in Australia has relatively been steady within the last ten years.

The graph below shows that the inflation rates hit historical high of over six percent in 2001 and slightly lower in 1998 with a percentage of over 5 percent. However, the period of 2002 to 2006 had an inflation rate that was steady. Within the last ten years, it hit the lowest of below 2 percent in 1999 (Jupp, 2001).

The Australian policy makers are encountering two main challenges including how to manage unemployment rate and controlling inflation rate. An increase in both of these has a negative effect on the economy as explained below.

Inflation Rate

An increase inflation rate has negative effects on the economy because it leads to erosion of the currency value. Therefore, the purchasing power of consumers goes down as they can only afford few items with their income compared to the period before the increase. This leads to a decrease in investment level, which results in a shortage of goods and services. The policy makers therefore always strive to keep the inflation rate at low levels to minimize the effects of a high inflation rate (Boyes & Melvin, 2006).

Unemployment rate

An increase in unemployment rate also has negative effects on the economy because it leads to a decrease in demand for goods and services. When the level of unemployment goes up, the amount of disposable income decreases because income is produced by a few people but shared by a large number.

The consequence is a reduction in demand. As a result, producers will reduce the amount of goods and services produced and the level of economic growth will go down. Policy makers always try to maintain unemployment rate at low levels to minimize the effects of high unemployment rate (Boyes & Melvin, 2006).

Trade off between unemployment and inflation rate

It is evident from the graph that when unemployment goes down, inflation rate goes up and when inflation rate goes up, unemployment rate decreases.

The trade off can be seen clearly by comparing data from the graph of unemployment rate with that of inflation rate. In the period that had high inflation rate, unemployment was low. On the other hand, in the periods that had high unemployment rate, the inflation rate was low.

For instance, in 2008, the inflation rate in Australia was at a high of over 5 percent while the unemployment rate was at a low of 4 percent. On the other hand, the unemployment rate was at a high of over 8 percent when the inflation rate was at a low of 1 percent (Mastrianna, 2008).

This is a big challenge to the policy makers considering the fact that the policy makers always seek to keep both rates at low levels. When the policy makers at the Australia Reserve Bank employ monetary policies to reduce one of the rates, they will end up increasing the other.

In addition, the Federal Government can also employ fiscal policies to reduce one of the rates and the other will increase automatically. Therefore, the policy makers must ensure that they use policies that reduce one rate to a level that will ensure that the other is only increased to an acceptable level (Lilja, Santamäki-Vuori & Standing, 1990).

One other obstacle is conflicting outcomes of effected policies. In this case, fiscal policies are put in place in an attempt to raise one rate and on the other hand, monetary policies bring down the rate. This therefore calls for coordination between the monetary and fiscal policy makers.

Targets refer to the goals that the policy makers seek to achieve when they implement various macroeconomic policies (Coricelli, 1998).

They include low inflation rate, low unemployment rate, reduction of the national debt, high economic growth and favourable balance of trade. For instance in 2008, Australia targeted an economic growth of 3.3 percent while in 2010 the government wanted to decrease inflation rate by 2.7 percent.

Instruments refer to the means through which the targets set will be achieved. Most of the times, instruments attempt to regulate the economy’s aggregate supply and demand. These instruments are mainly in two forms- monetary policies and fiscal policies (Reserve Bank of Australia, 2011).

Monetary policies refer to those policies implemented by the Reserve Bank of Australia (RBA), which seek to regulate the supply of cash in the economy (Munasinghe, 2006).

For instance, when inflation rates are going up, the RBA will increase their interest rates. This will force the commercial banks to lend to the public at interest rate not lower than the one set by the RBA. As a result, few people will borrow money from banks and the supply of money in the economy will go down.

This will in turn push the inflation rates down. Fiscal policies refer to the use of taxation and government expenditure. The Government can increase the supply of money in the economy by increasing its expenditure. Taxation can be used to stimulate investment whereby the government reduces taxes in sectors that it wants to see increase in investment (Tanzi, 1984).

Causes of inflation and their effects

The causes of inflation can be explained through the cost-push approach or the demand-pull approach. When inflation is a consequence of increased production costs, then it is referred to as cost-push approach.

As the cost of production increases, the producers will increase the cost of their products. On the other hand, consumers’ purchasing power will go down, which leads to demand for an increase in wages.

This in turn increases production costs, which is again passed to consumers. As a result, the price levels will continue to rise. Demand pull-inflation refers to inflation caused by an increase in demand beyond the production capacity of an economy. As demand increases, producers will increase their prices and if this is prolonged, inflation will set in (Hall, 1982).

In the current setting of Australian economy, there is high employment rate, which means inflation rate is also high. This is inflation caused by high demand in goods and services because most people have high disposable income. This will make them to demand for goods beyond the production capacity of the economy.

As a result, the producers have increased their prices to match that demand leading to an increase in inflation rates. Therefore, the theory learnt in class helps in determining which type of inflation the economy is experiencing (Semmler, Greiner & Zhang, 2005).

Fiscal Policy

This refers to the use of taxation and government expenditure to achieve economic objectives. In the current economic situation, the government needs to employ contraction fiscal policies. The economy is currently faced by demand-pull inflation, which means that it needs measures that will slow economic growth.

These include increase in taxes of consumer goods and reduction in government expenditure. Increase in taxes will reduce consumer purchasing power while reduction in government expenditure will reduce money in circulation. As a result, the demand for goods and services that was putting pressure on prices will go down. Therefore inflation will be reduced (Beetsma, 2004).

Monetary Policy

Monetary policies can also be applied to control demand-pull inflation because they can be used to reduce money supply in the economy. The Reserve Bank of Australia can increase interest rates, which will force commercial banks to increase their lending rates. As a result, the level of borrowing will go down and the level of money supply will decrease.

This leads to a decrease in demand for goods and services because consumers’ disposable income has been reduced. Prices for goods and services will also go down because of reduced demand, leading to a decrease in inflation rate (Langdana, 2009).

The main macroeconomic indicators are inflation rate, unemployment rate and GDP. From the above discussion, it is clear that the Australian economy is doing well, considering the fact that there has been a lot of instability in the global economy for the last ten to fifteen years.

This shows the expertise of the policy makers who have developed and implemented policies that have ensured that the economy is still stable and strong. However, there are some challenges that still face the policy makers, which include balancing the effects of the policies.

For instance, they should ensure that as they implement policies that decrease inflation rates, they do not increase unemployment to unacceptable levels. The theories learnt in class have helped in understanding the current economic situation in Australia and the appropriate policy measures that can be used to correct the high inflation rate.

Adelman I. (1961). Theories of economic growth and development . Stanford, CA: Stanford University Press.

Australian Bureau of Statistics (2005). Year book, Australia, Issue 87 . Canberra: Australia Bureau of Statistics.

Beetsma, R. M. W. J. (2004). Monetary policy, fiscal policies, and labour markets: macroeconomic policymaking in the EMU . Cambridge: Cambridge University Press.

Boyes W. and Melvin M. (2006). Economics . Boston, MA: Cengage Learning.

Conrad, B. (2009). Profiting from the world’s economic crisis: finding investment opportunities by tracking global market trends . Hoboken, NJ: John Wiley and Sons.

Coricelli F. (1998). Macroeconomic policies and the development of markets in transition economies . Budapest: Central European University Press.

Department of Foreign Affairs and Trade (n.d). About Australia . Web.

Hall, R. E. (1982). Inflation: causes and effects . London: University of Chicago Press.

Hughes, J. J. and Perlman R. (1984). The economics of unemployment: a comparative analysis of Britain and the United States . Cambridge: Cambridge University Press.

Jupp, J. (2001). The Australian people: an encyclopedia of the nation, its people and their origins . Cambridge: Cambridge University Press.

Langdana, F. K. (2009). Macroeconomic policy: demystifying monetary and fiscal policy . Newark, NJ: Springer.

Lilja, R., Santamäki-Vuori, T. and Standing, G. (1990). Unemployment and labour market flexibility: Finland . Geneva: International Labour Organization.

Mastrianna, F. V. (2009). Basic economics . Mason, OH: Cengage Learning.

Munasinghe M. (2006). Macroeconomic policies for sustainable growth: analytical framework and policy studies of Brazil and Chile . Cheltenham: Edward Elgar Publishing.

Reserve Bank of Australia (2011). Measures of consumer price inflation . Web.

Semmler W., Greiner A. and Zhang, W. (2005). Monetary and fiscal policies in the Euro-area: macro modelling, learning, and empirics . Amsterdam: Emerald Group Publishing.

Tanzi V. (1984). Taxation, inflation, and interest rates . Washington, DC: International Monetary Fund.

Trading Economics (n.d). Australia Gross Domestic Product (GDP) . Web.

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J.D. Vance: The Math on Ukraine Doesn’t Add Up

By J. D. Vance

Mr. Vance, a Republican, is the junior senator from Ohio.

President Biden wants the world to believe that the biggest obstacle facing Ukraine is Republicans and our lack of commitment to the global community. This is wrong.

Ukraine’s challenge is not the G.O.P.; it’s math. Ukraine needs more soldiers than it can field, even with draconian conscription policies. And it needs more matériel than the United States can provide. This reality must inform any future Ukraine policy, from further congressional aid to the diplomatic course set by the president.

The Biden administration has applied increasing pressure on Republicans to pass a supplemental aid package of more than $60 billion to Ukraine. I voted against this package in the Senate and remain opposed to virtually any proposal for the United States to continue funding this war. Mr. Biden has failed to articulate even basic facts about what Ukraine needs and how this aid will change the reality on the ground.

The most fundamental question: How much does Ukraine need and how much can we actually provide? Mr. Biden suggests that a $60 billion supplemental means the difference between victory and defeat in a major war between Russia and Ukraine. That is also wrong. This $60 billion is a fraction of what it would take to turn the tide in Ukraine’s favor. But this is not just a matter of dollars. Fundamentally, we lack the capacity to manufacture the amount of weapons Ukraine needs us to supply to win the war.

Consider our ability to produce 155-millimeter artillery shells. Last year, Ukraine’s defense minister estimated that the country’s base-line requirement for these shells was over four million per year but that it could fire up to seven million if that many were available. Since the start of the conflict, the United States has gone to great lengths to ramp up production of 155-millimeter shells. We’ve roughly doubled our capacity and can now produce 360,000 per year — less than a tenth of what Ukraine says it needs. The administration’s goal is to get this to 1.2 million — 30 percent of what’s needed — by the end of 2025. This would cost the American taxpayers dearly while yielding an unpleasantly familiar result: failure abroad.

Just this week, the top American military commander in Europe argued that absent further security assistance, Russia could soon have a 10-to-1 artillery advantage over Ukraine. What didn’t gather as many headlines is that Russia’s current advantage is at least 5 to 1, even after all the money we have poured into the conflict. Neither of these ratios plausibly leads to Ukrainian victory.

Proponents of American aid to Ukraine have argued that our approach has been a boon to our own economy, creating jobs here in the factories that manufacture weapons. But our national security interests can be — and often are — separate from our economic interests. The notion that we should prolong a bloody and gruesome war because it’s been good for American business is grotesque. We can and should rebuild our industrial base without shipping its products to a foreign conflict.

The story is the same when we look at other munitions. Take the Patriot missile system — our premier air defense weapon. It’s of such importance in this war that Ukraine’s foreign minister has specifically demanded them. That’s because in March alone, Russia reportedly launched over 3,000 guided aerial bombs, 600 drones and 400 missiles at Ukraine. To fend off these attacks, the Ukrainian president, Volodymyr Zelensky, and others have indicated they need thousands of Patriot interceptors per year. The problem is this: The United States only manufactures 550 per year. If we pass the supplemental aid package currently being considered in Congress, we could potentially increase annual production to 650, but that’s still less than a third of what Ukraine requires.

These weapons are not only needed by Ukraine. If China were to set its sights on Taiwan, the Patriot missile system would be critical to its defense. In fact, the United States has promised to send Taiwan nearly $900 million worth of Patriot missiles, but delivery of those weapons and other essential resources has been severely delayed, partly because of shortages caused by the war in Ukraine.

If that sounds bad, Ukraine’s manpower situation is even worse. Here are the basics: Russia has nearly four times the population of Ukraine. Ukraine needs upward of half a million new recruits, but hundreds of thousands of fighting-age men have already fled the country. The average Ukrainian soldier is roughly 43 years old , and many soldiers have already served two years at the front with few, if any, opportunities to stop fighting. After two years of conflict, there are some villages with almost no men left. The Ukrainian military has resorted to coercing men into service, and women have staged protests to demand the return of their husbands and fathers after long years of service at the front. This newspaper reported one instance in which the Ukrainian military attempted to conscript a man with a diagnosed mental disability.

Many in Washington seem to think that hundreds of thousands of young Ukrainians have gone to war with a song in their heart and are happy to label any thought to the contrary Russian propaganda. But major newspapers on both sides of the Atlantic are reporting that the situation on the ground in Ukraine is grim.

These basic mathematical realities were true, but contestable, at the outset of the war. They were obvious and incontestable a year ago, when American leadership worked closely with Mr. Zelensky to undertake a disastrous counteroffensive. The bad news is that accepting brute reality would have been most useful last spring, before the Ukrainians launched that extremely costly and unsuccessful military campaign. The good news is that even now, a defensive strategy can work. Digging in with old-fashioned ditches, cement and land mines are what enabled Russia to weather Ukraine’s 2023 counteroffensive. Our allies in Europe could better support such a strategy, as well. While some European countries have provided considerable resources, the burden of military support has thus far fallen heaviest on the United States.

By committing to a defensive strategy, Ukraine can preserve its precious military manpower, stop the bleeding and provide time for negotiations to commence. But this would require both the American and Ukrainian leadership to accept that Mr. Zelensky’s stated goal for the war — a return to 1991 boundaries — is fantastical.

The White House has said time and again that it can’t negotiate with President Vladimir Putin of Russia. This is absurd. The Biden administration has no viable plan for the Ukrainians to win this war. The sooner Americans confront this truth, the sooner we can fix this mess and broker for peace.

J.D. Vance ( @JDVance1 ), a Republican, is the junior senator from Ohio.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips . And here’s our email: [email protected] .

Follow the New York Times Opinion section on Facebook , Instagram , TikTok , WhatsApp , X and Threads .

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China's GDP rose 5.3% in the first quarter, but it doesn't mean the economic pain is over

• China's economy grew 5.3% in the first quarter of 2024, surpassing analyst expectations.
• Despite this, March retail sales and industrial output fell short of forecasts.
• China's property market is still struggling, with new home sales in the first quarter falling nearly 31%.

China reported robust economic growth for the first quarter of 2024.

The world's second-largest economy grew 5.3% in the first quarter of this year from a year ago, according to the National Bureau of Statistics — beating the 4.8% growth analysts polled by Bloomberg had forecast and the 5.2% growth it chalked up in the fourth quarter of 2023.

"We have got off to a solid start," Sheng Laiyun, the NBS's deputy director, said at a press briefing in Beijing, according to Bloomberg. He said industry was an important contributor to growth, contributing to more than one-third of first-quarter growth.

Louise Loo, the China economist at Oxford Economics, wrote in a note on Tuesday that China's economy was also supported in the first quarter by consumer spending for the Lunar New Year holidays in February.

Despite the rosy figures, a closer look at the figures indicates there's still pain ahead.

March retail sales rose 3.1% from a year ago, missing Bloomberg forecasts of 4.8% growth. Industrial output for March also missed forecasts, coming in at 4.5% — well below the 6% predicted by analysts.

"'Standalone' March activity indicators suggest weakness coming through post-Lunar New Year," Loo said.

Related stories

In particular, China's property market continued to be in the dumps amid a debt crisis , with first-quarter new home sales by value tanking nearly 31% from a year ago.

Notably, the data didn't include China's youth-unemployment rate, which hit a record high of 21.3% in June 2023 before Beijing revamped the methodology for the metric to exclude full-time students.

China is in a 'two-speed economy'

China's data dump on Tuesday reflects the country's changing economic landscape.

China's economy has traditionally relied on growth from real estate and lower-cost manufacturing. Beijing is now trying to pivot to three new drivers in the green sector: electric vehicles, solar cells, and lithium-ion batteries.

This has created a " two-speed economy " in which some sectors are doing well — but still aren't enough to offset the massive slump in the property sector, which accounts for about one-quarter of China's GDP .

"The recent economic recovery has been driven by exports. I think it is a two-speed economy," said Raymond Yeung, the chief China economist at ANZ, according to Reuters . "Domestic demand is still weak, but exports are good."

Yeung said he expected China's economy to continue on a similar path in the second quarter of the year.

Oxford Economics' Loo meanwhile expects headwinds to China's second-quarter growth as household spending normalizes and as inventory build-up is released onto the market.

China has a growth target of about 5.0% this year.

Watch: Protesters in China are trying to break out of quarantine

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NPR defends its journalism after senior editor says it has lost the public's trust

David Folkenflik

NPR is defending its journalism and integrity after a senior editor wrote an essay accusing it of losing the public's trust. Saul Loeb/AFP via Getty Images hide caption

NPR is defending its journalism and integrity after a senior editor wrote an essay accusing it of losing the public's trust.

NPR's top news executive defended its journalism and its commitment to reflecting a diverse array of views on Tuesday after a senior NPR editor wrote a broad critique of how the network has covered some of the most important stories of the age.

"An open-minded spirit no longer exists within NPR, and now, predictably, we don't have an audience that reflects America," writes Uri Berliner.

A strategic emphasis on diversity and inclusion on the basis of race, ethnicity and sexual orientation, promoted by NPR's former CEO, John Lansing, has fed "the absence of viewpoint diversity," Berliner writes.

NPR's chief news executive, Edith Chapin, wrote in a memo to staff Tuesday afternoon that she and the news leadership team strongly reject Berliner's assessment.

"We're proud to stand behind the exceptional work that our desks and shows do to cover a wide range of challenging stories," she wrote. "We believe that inclusion — among our staff, with our sourcing, and in our overall coverage — is critical to telling the nuanced stories of this country and our world."

NPR names tech executive Katherine Maher to lead in turbulent era

She added, "None of our work is above scrutiny or critique. We must have vigorous discussions in the newsroom about how we serve the public as a whole."

A spokesperson for NPR said Chapin, who also serves as the network's chief content officer, would have no further comment.

Praised by NPR's critics

Berliner is a senior editor on NPR's Business Desk. (Disclosure: I, too, am part of the Business Desk, and Berliner has edited many of my past stories. He did not see any version of this article or participate in its preparation before it was posted publicly.)

Berliner's essay , titled "I've Been at NPR for 25 years. Here's How We Lost America's Trust," was published by The Free Press, a website that has welcomed journalists who have concluded that mainstream news outlets have become reflexively liberal.

Berliner writes that as a Subaru-driving, Sarah Lawrence College graduate who "was raised by a lesbian peace activist mother ," he fits the mold of a loyal NPR fan.

Yet Berliner says NPR's news coverage has fallen short on some of the most controversial stories of recent years, from the question of whether former President Donald Trump colluded with Russia in the 2016 election, to the origins of the virus that causes COVID-19, to the significance and provenance of emails leaked from a laptop owned by Hunter Biden weeks before the 2020 election. In addition, he blasted NPR's coverage of the Israel-Hamas conflict.

On each of these stories, Berliner asserts, NPR has suffered from groupthink due to too little diversity of viewpoints in the newsroom.

The essay ricocheted Tuesday around conservative media , with some labeling Berliner a whistleblower . Others picked it up on social media, including Elon Musk, who has lambasted NPR for leaving his social media site, X. (Musk emailed another NPR reporter a link to Berliner's article with a gibe that the reporter was a "quisling" — a World War II reference to someone who collaborates with the enemy.)

When asked for further comment late Tuesday, Berliner declined, saying the essay spoke for itself.

The arguments he raises — and counters — have percolated across U.S. newsrooms in recent years. The #MeToo sexual harassment scandals of 2016 and 2017 forced newsrooms to listen to and heed more junior colleagues. The social justice movement prompted by the killing of George Floyd in 2020 inspired a reckoning in many places. Newsroom leaders often appeared to stand on shaky ground.

Leaders at many newsrooms, including top editors at The New York Times and the Los Angeles Times , lost their jobs. Legendary Washington Post Executive Editor Martin Baron wrote in his memoir that he feared his bonds with the staff were "frayed beyond repair," especially over the degree of self-expression his journalists expected to exert on social media, before he decided to step down in early 2021.

Since then, Baron and others — including leaders of some of these newsrooms — have suggested that the pendulum has swung too far.

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Legendary editor marty baron describes his 'collision of power' with trump and bezos.

New York Times publisher A.G. Sulzberger warned last year against journalists embracing a stance of what he calls "one-side-ism": "where journalists are demonstrating that they're on the side of the righteous."

"I really think that that can create blind spots and echo chambers," he said.

Internal arguments at The Times over the strength of its reporting on accusations that Hamas engaged in sexual assaults as part of a strategy for its Oct. 7 attack on Israel erupted publicly . The paper conducted an investigation to determine the source of a leak over a planned episode of the paper's podcast The Daily on the subject, which months later has not been released. The newsroom guild accused the paper of "targeted interrogation" of journalists of Middle Eastern descent.

Heated pushback in NPR's newsroom

Given Berliner's account of private conversations, several NPR journalists question whether they can now trust him with unguarded assessments about stories in real time. Others express frustration that he had not sought out comment in advance of publication. Berliner acknowledged to me that for this story, he did not seek NPR's approval to publish the piece, nor did he give the network advance notice.

Some of Berliner's NPR colleagues are responding heatedly. Fernando Alfonso, a senior supervising editor for digital news, wrote that he wholeheartedly rejected Berliner's critique of the coverage of the Israel-Hamas conflict, for which NPR's journalists, like their peers, periodically put themselves at risk.

Alfonso also took issue with Berliner's concern over the focus on diversity at NPR.

"As a person of color who has often worked in newsrooms with little to no people who look like me, the efforts NPR has made to diversify its workforce and its sources are unique and appropriate given the news industry's long-standing lack of diversity," Alfonso says. "These efforts should be celebrated and not denigrated as Uri has done."

After this story was first published, Berliner contested Alfonso's characterization, saying his criticism of NPR is about the lack of diversity of viewpoints, not its diversity itself.

"I never criticized NPR's priority of achieving a more diverse workforce in terms of race, ethnicity and sexual orientation. I have not 'denigrated' NPR's newsroom diversity goals," Berliner said. "That's wrong."

Questions of diversity

Under former CEO John Lansing, NPR made increasing diversity, both of its staff and its audience, its "North Star" mission. Berliner says in the essay that NPR failed to consider broader diversity of viewpoint, noting, "In D.C., where NPR is headquartered and many of us live, I found 87 registered Democrats working in editorial positions and zero Republicans."

Berliner cited audience estimates that suggested a concurrent falloff in listening by Republicans. (The number of people listening to NPR broadcasts and terrestrial radio broadly has declined since the start of the pandemic.)

Former NPR vice president for news and ombudsman Jeffrey Dvorkin tweeted , "I know Uri. He's not wrong."

Others questioned Berliner's logic. "This probably gets causality somewhat backward," tweeted Semafor Washington editor Jordan Weissmann . "I'd guess that a lot of NPR listeners who voted for [Mitt] Romney have changed how they identify politically."

Similarly, Nieman Lab founder Joshua Benton suggested the rise of Trump alienated many NPR-appreciating Republicans from the GOP.

In recent years, NPR has greatly enhanced the percentage of people of color in its workforce and its executive ranks. Four out of 10 staffers are people of color; nearly half of NPR's leadership team identifies as Black, Asian or Latino.

"The philosophy is: Do you want to serve all of America and make sure it sounds like all of America, or not?" Lansing, who stepped down last month, says in response to Berliner's piece. "I'd welcome the argument against that."

"On radio, we were really lagging in our representation of an audience that makes us look like what America looks like today," Lansing says. The U.S. looks and sounds a lot different than it did in 1971, when NPR's first show was broadcast, Lansing says.

A network spokesperson says new NPR CEO Katherine Maher supports Chapin and her response to Berliner's critique.

The spokesperson says that Maher "believes that it's a healthy thing for a public service newsroom to engage in rigorous consideration of the needs of our audiences, including where we serve our mission well and where we can serve it better."

Disclosure: This story was reported and written by NPR Media Correspondent David Folkenflik and edited by Deputy Business Editor Emily Kopp and Managing Editor Gerry Holmes. Under NPR's protocol for reporting on itself, no NPR corporate official or news executive reviewed this story before it was posted publicly.

New report estimates U.S. fraud losses exceed $233 billion annually

The first-of-its-kind analysis, based on spending between 2018 and 2022, follows a week after the white house endorsed new legislation to crack down on fraud including identity theft..

The U.S. government may lose between $233 billion and $521 billion to fraud each year, according to a rough federal estimate, the first of its kind, released Tuesday.

But the author of that report — the nonpartisan Government Accountability Office — simultaneously cautioned that its new figure is incomplete and imprecise because of a lack of reliable data and the inherent challenge in uncovering sophisticated schemes to steal federal funds.

The watchdog, known as GAO, computed its estimate by studying the federal budget between the 2018 and 2022 fiscal years, spanning the Trump and Biden administrations and the beginning of the coronavirus pandemic, when Democrats and Republicans alike provisioned historic aid that scammers repeatedly targeted.

With the aid of a complicated economic model, GAO computed that fraud in past years may have reached as high as 7 percent of federal spending, with the highest spikes probably coinciding with the past abuse of coronavirus relief funds.

GAO did not pinpoint fraud in specific federal programs, and it stressed its analysis could not be used to predict future federal losses. But it still presented its staggering finding as a stark warning to Washington, where the federal debt has surged this year to more than $34.5 trillion.

Citing the country’s fiscal health as “unsustainable,” the report called for significant reforms that “can reduce the loss of federal dollars and help improve the federal government’s fiscal outlook.”

Even before its release, though, the GAO report drew sharp, rare rebukes from the White House Office of Management and Budget, which raised significant concerns with its methodology in a formal letter released alongside the analysis Tuesday.

Jason Miller, the deputy director for management at OMB, stressed the fraud estimate is “not based on analysis of estimated losses by individual federal programs,” but rather is a government-wide figure derived from a “simulation model.”

Miller pointed to GAO’s own acknowledgments that it lacked the proper data to pinpoint the full extent of waste, fraud and abuse in some federal programs. And he said its release would “create confusion and promote misleading generalizations that have no factual connection” to federal spending.

The new report is still likely to rile Capitol Hill, where fiscal hawks from both parties have long lamented the scourge of federal waste, fraud and abuse — even if they have done very little to address the root causes of the problem. GAO repeatedly has asked Congress to adopt some basic reforms that might improve federal spending data and bolster the government’s ability to spot scams, but Democrats and Republicans often have ignored the requests.

The GAO’s indictment arrives one week after the White House joined Senate Democrats in unveiling new legislation that would crack down on fraud targeting federal programs. The $1.3 billion bill would deliver on President Biden’s two-year-old request by investing new resources toward fighting identity theft, aiming to ward off scammers who use Americans’ information to obtain government benefits they do not deserve.

Identity theft long has dogged the government, but it emerged as one of the most costly, devastating scourges during the coronavirus pandemic. Criminals repeatedly relied on stolen information to bilk government programs that were supposed to help Americans who were out of a job or businesses at risk of closing their doors.

Underscoring the problem, the Justice Department announced last week it had brought charges against more than 3,500 defendants, and secured the seizure or forfeiture of more than $1.4 billion, in connection with illegally obtained coronavirus relief funds since 2021. Endorsing new anti-fraud legislation, Attorney General Merrick Garland added that the government’s work is still “far from over.”