ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fiscal policy can increase aggregate demand, but monetary policy cannot
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fiscal policy involves changes in taxes and government spending, and monetary policy does not
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fiscal policy can stimulate economic activity, while monetary policy cannot
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fiscal policy is used to stabilize the economy, while monetary policy is not used for this purpose
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Detailed explanation-1: -Monetary policy refers to central bank activities that are directed toward influencing the quantity of money and credit in an economy. By contrast, fiscal policy refers to the government’s decisions about taxation and spending. Both monetary and fiscal policies are used to regulate economic activity over time.
Detailed explanation-2: -Monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. Fiscal policy refers to the tax and spending policies of the federal government.
Detailed explanation-3: -Fiscal policy is a means to use government spending and taxation to influence the economic situation. It is different from the monetary policy that is under the control of the central bank in that country. Together these two policies can help a country to achieve its economic goals.
Detailed explanation-4: -Fiscal Policy is carried out by the Ministry of Finance whereas the Monetary Policy is administered by the Central Bank of the country. Fiscal Policy is made for a short duration, normally one year, while the Monetary Policy lasts longer. Fiscal Policy gives direction to the economy.
Detailed explanation-5: -Monetary policies are formed and managed by the central banks of a country and such a policy is concerned with the management of money supply and interest rates in an economy. Fiscal policy is related to the way a government is managing the aspects of spending and taxation.