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The power of Monetary and Fiscal Policy on the Economy

By nickbeatriz Oct 28, 2014 295 Words

The power of Monetary and Fiscal Policy on the Economy
I. The US government plays an important role on the economy as a regulator of specific industries. It is also responsible for managing the overall pace of economic activity, seeking to maintain high levels of employment and steady prices. To achieve these goals, the government has two fundamental tools that are necessary to help them make important decision to keep the economy under control. II. Fiscal and Monetary policies are the two most powerful tools that the government uses in order to stabilize and regulate the nation’s economy. a. Fiscal policy relates to the impact of government spending and tax on aggregate demand and the economy. b. Monetary policy is control by the Federal Reserve Bank one of the ways that the U.S. government attempts to control the economy III. The government and the Fed use fiscal and monetary policies combined to influence the direction of the economy and meet economic goals by: a. Helping struggling businesses save money.

b. Releasing money in the economy to improve expenditures.
c. Decreasing taxes
IV. Monetary and fiscal policies together affect the economy by: a. Rising in unemployment
b. Fall in consumer spending due to inflation
c. Offering low interest rate to stimulate people to borrow and spend more. V. Fiscal and Monetary policies are closely related and, the both have a major impact on the economy all over the world. The United States uses both tools to help keep the nation’s economy stabilized and under control. Both of these policies, monetary and fiscal, have their strengths and weaknesses, some situations favoring use of both policies, but most of the time, only one is necessary. Citation

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