Economics

Topics: Monetary policy, Inflation, Macroeconomics Pages: 0 (671 words) Published: August 30, 2014
RECAP - MODULE
OUTCOMES
 Introduction to macroeconomics
 Measuring performance of the economy
 The Monetary Sector
 The Public Sector
 Macroeconomic Theories
 Inflation
 Unemployment
 Economic growth and development
 The foreign sector

THE PUBLIC SECTOR:
STUDY UNIT 4

What are Your Views on Fiscal
Policy and How Fiscal Policy
Affects You?

Roles of Government in a mixed economy
1. Establishing and enforcing rules of exchange

such as Property rights, Contract law
2. Promoting competition/prevent anticompetitive

practices
3. Regulating natural monopolies
4. Provide public goods
5. Dealing with externalities i.e.cost or benefit that falls on third parties and is therefore ignored by the two parties to the market transaction

6. Redistribute income
7. Promote macroeconomic goals

How is the Monetary Policy different
from the Fiscal Policy?


The Monetary Policy regulates the supply of money and the cost and availability of credit in the economy. It deals with both the lending and borrowing rates of interest for commercial banks.



The Monetary Policy aims to maintain price stability, full employment and economic growth.



The Monetary Policy is different from Fiscal Policy as MP brings about a change in the economy by changing money supply and interest rate, whereas fiscal policy is a broader tool with the government.



The Fiscal Policy can be used to overcome recession and control inflation. It may be defined as a deliberate change in government revenue and expenditure to influence the level of national output and prices.

Meaning of Fiscal Policy
 Fiscal policy is also called Budgetary policy. It is

primarily concerned with the receipts and expenditures
of the government; it also relates to the study of
economic effects of these receipts and expenditures
 Fiscal policy refers to government policy that attempts

to influence the direction of the economy through
changes in...
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