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growth 3) past and current macroeconomic policies and their impacts in the short run and
in the long run

Two main macroeconomic policies that affect Venezuela as a country is the fiscal policy and
the monetary policy. The fiscal policy is the action of a government changing their spending
habits to stimulate economic growth in the country. Fiscal policy can also include changes in tax
rates to influence a countrys economic state. Monetary policy is the changes in the money
supply. Other macroeconomic policies that affect the economy of a country include debt
management policy and income policy.
In the past, Hugo Chavez was one of the greatest influences on the economy of the
country of Venezuela. When Chavez was president, the real economy grew by 95 percent.
Poverty was cut in half and extreme poverty by more than 70 percent, social spending per person
more than tripled, and access to health care and higher education rose sharply. Fiscal policy has
affected Venezuela in the past because one of Venezuelas main exports is oil. In 1986, there was
a crash in the oil markets and this crash greatly affected Venezuelas economy. The average price
of a barrel of oil was $27 a barrel and after the crash, the price dropped over sixty percent and
the average price of a barrel of oil was under ten dollars. This severely hurt Venezuelas economy
and caused a fiscal deficit of 4 percent of GDP and continued to drop until 1988, where the fiscal
deficit reached a low of 6 percent of GDP. For fiscal policies to work the government can either
create large deficits by increasing government spending to counteract the downfall of an
economy but this only work if the country has the capital to do so such as the United States. On
the other hand, developing countries such as Venezuela, must do the complete opposite, the
government must reduce spending in order to prevent too deep of a deficit from occurring. This
in the short run would negatively impact the aggregate demand.
Banco Central de Venezuela (BCV) is the central bank of Venezuela and like all
banks, is responsible for managing the money supply for the country. In the 1980s, the BCV has
revised the nations monetary policy numerous times in order to increase their control over the
money supply. The Venezuelan government heavily regulates the countrys economy by
controlling the prices of many basic goods such a food. Due to the heavily regulated economy,
the relaxation of price controls has caused spikes in the rates of inflation. With Venezuelas
heavily regulated economy, black markets are very prevalent in the country. Black markets can

heavily affect a nations economic growth and contributes to inflation of a nation as well as
capital flight. Venezuela is an example of this, with the crash of the Boliviars, which is the
currency of Venezuela.
The current policies and their short ru