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Discuss the advantages of monetary policy over fiscal policy. In a time of recession, can monetary...

Discuss the advantages of monetary policy over fiscal policy. In a time of recession, can monetary policy alone help the economy get out of the slump?

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Answer #1

The advantages of monetary policy over fiscal policy are:

1. The Fed can implement monetary policy in a short duration of time to meet the current unexpected market changes as compared to fiscal policy which takes a long time to get passed and then implemented.

2. There is no political influence or pressure on the implementation of monetary policy as compared to fiscal policy

3. Since monetary policy works by manipulating money supply, it has a better command in controlling inflation

Yes, during recession the monetary policy can alone help the economy get out of slump by implementing an expansionary monetary policy.

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