monetary and fiscal policy play important roles in economic stimulation and or stabilization. In...

Question

monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard:

a. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy?

b. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy?

c. What specific fiscalpolicy tools would you use to stimulate aggregate demand and how?

d. What specific monetary policy tools would you use to stimulate aggregate demand and how?

e. What is your conclusion, shouldpolicymakersuse the monetary and or fiscal policy to stimulate aggregate demand? Explain briefly.

Please give 3 references

Komalavalli · Accepted Answer

Roles of Monetary and fiscal policy in economic stimulation and or stabilization of the economy 
a. Appropriate situation to use policies of monetary and fiscal to stimulate or stabilize the economy
Central bank uses policies such as Fiscal and Monetary to stabilize or stimulate the economy.  Monetary policy has a control on supply of money and rate of interest while Fiscal policy has control over the government spending and taxation. It is appropriate to use monetary policy (increase or decrease in money supply and interest rate) when there is a perfectly interest inelastic demand for money and to use fiscal policy (increase or decrease in government spending or tax rate) when there is perfectly interest elasticity of investment expenditure.  
b.

monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard: a. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment