Question

Summarise the various forms of monetary and fiscal responses around the world. Given these responses, what are the risks of the current stimulus policies.

Answer 1

Government can influence the performance of the economiesby using combination of monetary and fiscal policy. Monetary policy refer to the central bank activities that are directed toward influencing.By contrast fiscal policy refers to the government's decision about the taxation and spending.

Both fiscal and monetary policy can alter aggregate demand .They work through different channels ,the policies are therefore not interchangeable ,and they conceivable can work against one another unless the government and central bank can coordinate their objectives.

various risks of current stimulus policies are hyperinflation,government defaults,nationalisation of industries,higher tax revenues resulting from faster growth rate.