Table of Contents
- 1 How do policymakers use fiscal and monetary policy to stabilize the economy?
- 2 How does the fiscal and monetary authority work towards achieving equilibrium in the exchange rate?
- 3 How does fiscal and monetary policy impact the economy quizlet?
- 4 Why fiscal policy and monetary policy coordination is an essential part of economic policy?
- 5 How are monetary and fiscal policy instruments used to achieve macroeconomic goals?
- 6 How can fiscal policy and monetary policy restore an economy?
How do policymakers use fiscal and monetary policy to stabilize the economy?
Fiscal policy can promote macroeconomic stability by sustaining aggregate demand and private sector incomes during an economic downturn and by moderating economic activity during periods of strong growth. An important stabilising function of fiscal policy operates through the so-called “automatic fiscal stabilisers”.
When the government or Federal Reserve uses monetary or fiscal policy to expand the economy, this increases our income and our demand for imports, and ultimately lowers the exchange rate.
What should be the appropriate mix of fiscal and monetary policy from a Keynesian perspective?
Given the state of the economy and the causes of that state—think back to our online discussions a few weeks ago—what should be the appropriate mix of fiscal and monetary policy, from a Keynesian perspective? Ideally, the policy mix should aim at maximizing growth and minimizing unemployment.
How monetary and fiscal policy are used in a recessionary situation?
If recession threatens, the central bank uses an expansionary monetary policy to increase the money supply, increase the quantity of loans, reduce interest rates, and shift aggregate demand to the right.
How does fiscal and monetary policy impact the economy quizlet?
Fiscal policy is when the government changes taxes on government expenditures to influence the level of economic activity. Monetary policy is when the Federal reserve bank attempts to influence the money supply in order to stabilize the economy.
Why fiscal policy and monetary policy coordination is an essential part of economic policy?
The rationale for the monetary and fiscal policy coordination derives from the interrelated nature of objectives. Without efficient policy coordination, financial instability could ensue, leading to high interest rates, exchange rate pressures, rapid inflation, and adverse impact on economic growth.
How can the South African government use fiscal policy to stimulate the economy?
Increases in government expenditure can benefit the economy by affecting the level of income and its distribution. This can influence people’s wages and returns to capital thereby affecting saving and investment, thus potentially boosting economic growth.
What should be the appropriate mix of fiscal and monetary policy from a Keynesian perspective from a neoclassical perspective?
Keynesians believe fiscal and monetary policy should be used actively in the short run to manage aggregate demand. Neoclassicals believe that the economy is self-correcting, and attempting to fine-tune the economy through monetary and fiscal policies makes problems worse.
How are monetary and fiscal policy instruments used to achieve macroeconomic goals?
BU204M5: Analyze how monetary and fiscal policy instruments are used to achieve macroeconomic goals. One of the main roles of the government is stabilizing the economy to attain macroeconomic goals such as price-level stability, full employment, and economic growth.
How can fiscal policy and monetary policy restore an economy?
1 A combination of fiscal and monetary policies can be used to restore an economy to full employment. 2 Fiscal and monetary policy can impact output, inflation, unemployment, and interest rates. 3 Monetary policy can be used to mitigate the impact of fiscal policy on interest rates. Now, suppose that a government increased its spending.
Can fiscal policy and monetary policy be used to close output gaps?
Topics include how fiscal and monetary policy can be used in combination to close output gaps, and how fiscal and monetary policy affect key macroeconomic indicators such as output, unemployment, the real interest rate, and inflation. In the last unit, we learned that either fiscal policy or monetary policy could be used to close output gaps.
Is expansionary fiscal policy more effective than expansionary monetary policy?
In terms of improving the real economy, expansionary fiscal policy is more effective. In terms of the financial economy, expansionary monetary policy is the better choice. Both types work through different channels and impact individuals and corporations in different ways.