RECAP - MODULE
Introduction to macroeconomics
Measuring performance of the economy
The Monetary Sector
The Public Sector
Economic growth and development
The foreign sector
THE PUBLIC SECTOR:
STUDY UNIT 4
What are Your Views on Fiscal
Policy and How Fiscal Policy
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
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
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