Fiscal Policy & Monetary Policy

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What is Fiscal Policy?

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Fiscal Policy refers to government measures/approaches used to influence aggregate demand through government spending and taxation.

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What are Expansionary Fiscal Policies?

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Expansionary Fiscal Policies are measures taken by the government to increase aggregate demand, typically through increased government spending or reduced taxes.

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What are Contractionary Fiscal Policies?

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Contractionary Fiscal Policies are measures taken by the government to decrease aggregate demand, typically through reduced government spending or increased taxes.

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What is the purpose of Automatic Stabilizers?

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Automatic Stabilizers are features of government budgets that dampen fluctuations in real GDP, such as progressive income taxes and welfare spending.

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What is the definition of Monetary Policy?

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Monetary Policy is the economic policy used by a central bank to manage money supply, interest rates, and inflation.

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What are the primary objectives of Monetary Policy?

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The primary objectives of Monetary Policy are to control inflation, promote stable economic growth, achieve full employment, and stabilize currency.

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What are the key tools of Monetary Policy?

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The key tools of Monetary Policy include discount rates, open market operations, and reserve requirements.

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What is the effect of Expansionary Monetary Policy?

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Expansionary Monetary Policy lowers interest rates to stimulate economic growth by making borrowing cheaper.

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What is the effect of Contractionary Monetary Policy?

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Contractionary Monetary Policy raises interest rates to control inflation by making borrowing more expensive.

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What is a Fiscal Budget?

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A Fiscal Budget is a statement of a government's incomes and expenditures, which can be a deficit, balanced, or surplus budget.