How does monetary policy differ from fiscal policy? The Fed employs specific tools to fight a recession. List and explain them. Which do you think is the most effective? ORIGINAL ANSWERS ARE THE BEST ANSWERS!
With fiscal policy the government influences the economy by changing how
the government collects and spends money. The most common tools that
the government enacts to effect fiscal policy include:
• Increased Spending on new government programs and initiatives (such as
job creation programs). This has the effect of increasing demand for
labor and can result in lower unemployment levels
• Automatic Fiscal Programs are programs that take effect immediately to
help correct the slide in the economy. Probably the single best example
of this is unemployment insurance which a person can file for as soon
as they lose their job.
• Tax Cuts are another tool that government uses to stimulate demand for
goods and services when the economy takes a turn for the worse. The
effect of a tax break is to put more money back in the pockets of
businesses and consumers which they can spend and put back to work in
Monetary Policy, on the other hand, involves the manipulation of the
available money supply within the economy. likewise increasing the
interest rates, CRR, SLR etc
Jun 15th, 2014
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