Monetary Policy Vs Fiscal Policy - 1114 Words

Monetary Policy vs Fiscal Policy There are two powerful tools that the government and the Federal Reserve use to direct our economy in the right direction- Fiscal Policy and Monetary Policy. When these tools are used appropriately, they can fuel the economy and slow it down when it is growing too fast. Fiscal policy is concerned with government spending and collecting taxes. With the fiscal policy, you can increase government spending and decrease taxes to increase disposable income for people as well as corporations. Monetary Policy on the other hand refers to the supply of money which is controlled by factors such as interest rates and reserve requirements for banks. These methods are applicable in a market economy, but not in a communist or social economy. Fiscal policy is often linked with Keynesianism (Michael Smith, Investpedia), which is derived from British economist John Maynard Keynes. Theories of Keynesianism have been used over time as they are popular and specifically applied to assuage economic downturns. The principle behind fiscal policy is influencing the level of aggregate demand in the economy to achieve economic factors of stabilizing the price, full employment and economic growth. Fiscal Policy is a government’s decision regarding spending and taxing. If a government wants to increase or restore growth in the economy, Spending rises. More items are purchased in spite of sticky prices, because of this the firm increases output.Show MoreRelatedMonetary Vs. Fiscal Policy1012 Words   |  5 PagesMonetary Vs. Fiscal Policy, Which is best? There are two separate ways that the economy can be regulated; the two options are fiscal and monetary policy. Both of these policies main goal is to get the economy to be in economic equilibrium. Economic Equilibrium is a condition or state in which economic forces are completely balanced and allows for optimal use of the economy. Then we are faced with the question of if the economy in in an inflationary gap or a recessionary gap. This paper is goingRead More Fiscal Policy vs. Monetary Policy Essay678 Words   |  3 Pages Fiscal Policy vs. Monetary Policy nbsp;nbsp;nbsp;nbsp;nbsp;With America in recovery from the attacks on our freedom and our economy, many wonder if we will return to phase one (expansion) and how long it will take to reach phase two (recession) again. The Keynesian Theorists of America believe that the government should actively pursue Monetary policies (enacted by the Federal Reserve Bank) and Fiscal policies (enacted by Congress) to reach adjustments to price, employment, and growth levelsRead MoreDo Fiscal and Monetary Policy Stimulate the Economy? Essays1467 Words   |  6 Pagesgovernment implements and enforces certain policies that apply to specific situations and circumstances. Such policies guide the government into influencing and controlling the direction of activity through borrowing, spending, and taxes. Those policies are called economic policies, which are also implemented to control the total demand for final goods and services in the economy at a given time and price level (aggregate demand). There are two policies that specifically control aggregate demandRead MoreFiscal Policy And Monetary Policy862 Words   |  4 PagesFiscal Policy vs Monetary Policy Fiscal policy is a way for the government to control the economy financially. The Federal Government sometimes partakes in actions to stimulate the economy. Fiscal Policy focuses on changing government spending, controlling inflation, encouraging economic growth, and to reach full employment. Monetary policy is a policy the Federal Reserve Board enforces which consists of changes in the money supply which influences the interest rates in the economy. This can helpRead MoreSouth Africas Fiscal Monetary Policy1608 Words   |  7 PagesSouth Africa’s Fiscal amp; Monetary Policy o Table Of Contents †¨ o Introduction o Body o Conclusion o References Introduction In this presentation I will discuss whether or not the South African fiscal and monetary policy are complimentary or not. We need to first define both the fiscal and monetary policy in their economic sense. Firstly, the formal definition of the monetary policy are all the deliberate steps of the monetary authority to affect monetary aggregates such as the money supplyRead MoreEssay on Government Spending, Deficits, and Keynesian Economics1236 Words   |  5 PagesSince higher interest rates are believed to reduce investment, and because investment is necessary for long-run economic growth, proponents of this view also known as deficit hawks emphasize that avoiding deficits should be the primary goal of fiscal policy. Yes, the reason for the high budget deficit matter because many economists feels as though this will eventually affect our children and/or even our grandchildren. Not only that we must know how to budget the money. The government needs toRead MoreEffects of Long-Term Deficit Spending1687 Words   |  7 Pagesbenefits and other spending. As the economy grows the deficits falls as revenues increase and the debt becomes easier to pay (Sharing the pain; dealing with fiscal deficits, 2010). Conversely, when the economy is in a slump, the government in response will increase spending both in response to increased unemployment and as a matter of monetary policy to invigorate investment. This increased spending is funded through debt the government takes. In many ways, it is similar to how a household might use creditRead More Use of Monetary Policy and Fiscal Policy During The Great Recession1110 Words   |  5 PagesHow can monetary policy and fiscal policy greatly influence the US econ omy? Keynesian economics says, â€Å"A depressed economy is the result of inadequate spending .† According to Keynesian the government intervention can help a depressed economy through monetary policy and fiscal .The idea established by Keynes was that managing the economy is a government responsibility . Monetary policy uses changes in the quantity of money to alter interest rates, which in turn affect the level of overall spendingRead MoreTwo Of The Most Implemented Policies Government Use To Achieve Economic Growth Are Monetary Policy And Fiscal Policy1667 Words   |  7 Pagesgrowth and the trade-off of economic growth. Fiscal And Monetary Policies According to the formula AD = C + I + G +X –M, we understand government have a huge part in the economic growth of a nation. If government spending increase it will cause the the AD to increase as well which would then lead to the increment in the GDP of the nation. Conversly, government can decrease their spending power to control the growth. Fiscal Policies and Monetary Policies are what the government use to control economicRead MoreMonetary Policy And Interest Rates1588 Words   |  7 Pagesto Save (MPS) is based on the money that the same consumer is willing to save vs. put back into the economy. There are foreign language formulas that can depict various types of Multipliers, (GDP, TAX, Govt Spending) but for this document we will not touch on the related formulas. But trust me Ed, they are there. Monetary policy and interest rates As we learned in our Economics 545 class, the Government (our policy makers) is not the only entity that can manipulate the business cycle and our