When we study economics, we will realized that economics discipline demand thinking logically and are consistently based on models. Economists also generally assume that people respond to economic incentives. Even lecturers and researchers need incentives to motivate them to do a good research. In today’s world, where you need creativity, you cannot motivate people to do a good research by just commanding them. You need to motivate them by promising to give the right incentives if they produce something.
In economics we never really have only answers, but we are able to understand things better through research that initiates debate and makes good policy outcomes more likely. Many of the new ideas that are published in the academic journals and books have helped to guide policy makers. Researchers for example have to forecast economy and try to understand what going on in the economy, such as inflation, unemployment, balance of payment, economics growth, poverty alleviation and income distribution.
Economists normally suggest to policy makers to look for the future if they want to promote a stable economic environment in which the economy have a very low inflation. Sometime, during a business cycle expansion, there may be a tendency for the economy to overheat a little bit and a little bit of inflation to occur. Bank Negara Malaysia normally will starting implementing tighten monetary policy (higher interest rate, directive to commercial banks to control credit creation, etc.) to make sure inflation under control. Economics condition will then continued to grow at a sustainable pace.
What happens during a business cycle depreciate? When companies and banks had borrowed heavily abroad, the further depreciation of currencies value would have exacerbated financial problems by increasing the burden of servicing dollar-dominated debts. Financial and corporate sector inefficiency will make the problem become more challenging to be solved. Then, the government which trying to restore their popularity will try not to support unpopular strategy, such as increasing interest rate and depreciate the value of money. During that situation, government will also have a problem of getting a good support from the public, while not easy to restore market confidence. This will led to greater capital outflows and put additional upward pressure on interest rates and downward pressure on exchange rates, and forced a larger downward adjustment of domestic demand.
Actually Economists not only using economics knowledge to assist policy makers to do the right decisions, normally economists who works with educational sectors trying to educate students to become a better educated citizens. I think economics is a very powerful tool in achieving them. Students should realize that economists have a broad range of employment choices from working in business, government, research, and educational institutions. In developed countries, among social scientists, economists tend to be the more highly paid.