Monetary & Fiscal Policy
Two Differing Policies
Monetary vs Fiscal
The Two Policies
- Fiscal policy is just when a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.
- Not only that it is also the sister strategy to monetary policy through which a central bank influences a nation's money supply.
- These two policies are used in various combinations to direct a country's economic goals.
- Before the Great Depression, which lasted from Sept. 4, 1929 to the late 1930s or early 1940s, the government's approach to the economy was laisse-faire and after world war 2 it was determined that the government had to take a proactive role in the economy to regulate unemployment, business cycles, inflation and the cost of money.
- governments are able to control economic phenomena.
- If a government believes there is not enough spending and business activity in an economy, it can increase the amount of money it spends, often referred to as "stimulus" spending.
- If there are not enough tax receipts to pay for the spending increases, governments borrow money by issuing debt securities and, in the process, accumulate debt, or "deficit."
B: Low taxes & government spending
C: High taxes& Government expenditure
D:Spending & Taxation
Q2: What is affected by automatic stabilizers ?
A: Aggregate supply
C: Aggregate Demand
D: Net exports.
Q3: What would be the cause of Stagflation?
A: A change in AS
B: A negative supply change
C: A supply shock
D: Low economic growth
Works Cited (MLA Format)
Monetary and Fiscal Policy." Khan Academy. N.p., n.d. Web. 30 Apr. 2015.
Macro 3.7- Fiscal Policy: Non-discretionary vs Discretionary "AP Macro""YouTube. N.p., n.d. Web. 30 Apr. 2015.