Question

In your opinion, which policy is more effective to stabilize the economy? Fiscal or Monetary Policy?...

In your opinion, which policy is more effective to stabilize the economy? Fiscal or Monetary Policy? Briefly discuss.

Homework Answers

Answer #1

In order to stabilize the economy, a single policy does not work. It is generally seen that a combination of both monetary and fiscal policy is needed to stabilize the economy. For instance, in times of recession expansionary fiscal policy is followed. But this policy of the government leads to crowding out effect on the economy. In order to prevent this crowding out impact, expansionary monetary policy is needed to keep interest rates constant. This will prevent crowding out impact on the economy. Also, in times of 2008 recession, a combination of both monetary and fiscal policy was followed by Federal bank and government to move the economy out of recession.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In your opinion, which policy, the expansionary fiscal policy, or the expansionary monetary policy, will be...
In your opinion, which policy, the expansionary fiscal policy, or the expansionary monetary policy, will be more effective to recover the U.S. economy from the current downturn by COVID-19 pandemic? Why? Please state your answer in the language of economics.
Explain what would be the most effective policy for U.S. economy right now in 2019 (fiscal...
Explain what would be the most effective policy for U.S. economy right now in 2019 (fiscal and monetary). Now, if the economy is in a recession, analyze the role of using fiscal and monetary policy to help stabilize the economy.
Carefully explain why monetary policy is likely to be more effective in an open economy than...
Carefully explain why monetary policy is likely to be more effective in an open economy than fiscal policy.
FISCAL OR MONETARY POLICY? Think back to the discussion of the fiscal policy. 1. In the...
FISCAL OR MONETARY POLICY? Think back to the discussion of the fiscal policy. 1. In the event of a financial crisis, would it be preferable for the government to stabilize the economy using fiscal or monetary policy? 2. What are the dangers of using fiscal policy? 3. When might the government have no choice but to use fiscal policy?
why is monetary policy more effective in an open economy compared to a closed economy ?
why is monetary policy more effective in an open economy compared to a closed economy ?
Fiscal policy would be more effective than monetary policy during a typical recession and financial crisis....
Fiscal policy would be more effective than monetary policy during a typical recession and financial crisis. Why?
Monetary and Fiscal Policy: Regarding Monetary and Fiscal Policy, identify a)which institution(s) conduct monetary policy and...
Monetary and Fiscal Policy: Regarding Monetary and Fiscal Policy, identify a)which institution(s) conduct monetary policy and which institution(s) conduct fiscal policy; b)identify 2 tools of monetary policy and identify 2 tools of fiscal policy; c)explain the goal of loose monetary policy (easy money); d) explain the goal of tight fiscal policy.
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?
In which of the following cases will expansionary monetary policy be more effective at pulling an...
In which of the following cases will expansionary monetary policy be more effective at pulling an economy out of recession? Assume that the monetary expansion will result in a 5% inflation rate. Choose one or more: A. In the past, the inflation rate has always climbed to around 6% following an expansionary monetary policy. B. The Fed publicly announces that the monetary policy will result in a 5% inflation rate. C. People consistently expect a 0% inflation rate. D. Inflation...
Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of...
Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of economic fluctuations. In practice, however, there are obstacles to the use of such policies. What are the primary difficulties with using monetary and fiscal policy to stabilize the economy?