Monetary Policy Vs Fiscal Policy

Fiscal policy is budgetary plan such as changes in government spending and taxation to attain a specific economic objective. The discretionary fiscal policy encompasses fine-tuning government spending and taxes with the explicit goal of affecting the economy towards the future full employment of the workforce, increasing growth of the economy, and control of inflation. Examples of discretionary spending:

When the Federal government has to find ways to regain any money lost they lean on the expansionary Fiscal policy and the monetary policy to regain money into the economy. Whether, a change in taxes or even government spending. Even to the three major tools of the expansionary monetary policy to focus on. In the first part of this paper, I will discuss the expansionary fiscal policy and how the Federal government was involved and the changes that needed to be made to taxes, government spending. The second part of this paper, I will discuss the monetary policy and the tools the Federal Reserve used when under this policy. The expansionary fiscal policy was out to kick start the economy, and the expansionary monetary policy was out to change interest rate, and influence money supply. When discussing these two policies you have to think about one aspect when will it ever stop? Will a policy always have to be part of the economy to help the government one way or another?

The term monetary policy refers to what the Federal Reserve, the nation’s central bank, does to influence the amount of money and credit in the U.S economy. The main goals of this policy are to achieve or maintain full employment, as well as, a high rate of economic growth, and to stabilize prices and wages. By enforcing an effective monetary policy, the Federal Reserve System can maintain stable prices, thereby supporting conditions for long-term economic growth and maximum employment. Up until the early 20th century experts felt that monetary policy had little use in influencing the economy. After WWII inflationary trends caused governments to ratify measures that decreased inflation by restricting growth in the money supply.

A Fiscal Policy is changes in government spending and taxation in order to achieve certain economic goals. Within Fiscal Policy, there is expansionary and contractionary and in an Expansionary Fiscal Policy there is increased in government spending, lower taxes and/or a combination of both. An Expansionary Fiscal Policy will stimulate production and reduce unemployment. By the federal government spending more money into the economy, businesses will be producing more, which more and more people will purchase. Businesses will expand as well, and will hire more workers, shrinking the unemployment rate to a degree. Since it is a combination of both increased government spending and decreased taxes, it will not overheat the economy. Monetary Policy on the other hand is changes to the money supply in order to achieve particular macroeconomic goals. This involves expansionary and contractionary and a Contractionary Monetary Policy is used to decrease the money supply when the growth in the economy is “too fast”. A Contractionary Monetary Policy will decrease investment and slow economic expansion. In other words, decrease inflation and GDP. We believe that our Contractionary Monetary Policy and Expansionary Fiscal Policy will counteract to find a balance. We are taking money from some government programs with Contractionary Monetary Policy, and using the Expansionary Fiscal Policy to thrust receding businesses into

As an assistant manager for Skanska I have been asked by my manager to explain how fiscal and monetary policy decisions affect the business in which I work. To undertake this task I will provide explanation of the fiscal and monetary policies. I will also explain what interest rate is and what could be possible changes on it. Additionally, I will explain how both policies could make changes in employment level. Fiscal policy

Fiscal policy-is the ability of the federal government to increase and decrease its spending, if government spending is zero, there will limited economic growth (Mitchell, 2005). Current government borrowing shifts the burden to future generations to repay debt. An example of how this policy has been used in the past to improve the economy is when the Federal Reserve System lowered its discount rate and in early 2008 Congress passed the Economic Stimulus Act of 2008 (govtrack.us). The legislation gave taxpayers a tax rebate in the form of a check up to $600 for single filers, $1200 for married couples filing jointly (cnn.com). The hope was that consumers would take these checks and spend them to help keep the economy moving

Expansionary fiscal policy is when taxes are cut and government spending is increased. Lower taxes will increase disposable income for consumers. The increase in disposable income will lead to a higher level of consumer spending. In theory the more money that consumers spend, the higher the possibility for economic growth. Tax cuts will also lead to an increase in aggregate demand, which is the total demand for goods and services in the economy.

Governments can use both fiscal and monetary policies to move the economy from a recessionary or expansionary gap. Fiscal policies include increased or decreased government spending, increased or decreased taxation; on the other hand monetary policies include increased or decreased money supply, changes in interest rate, etc.

Currently, the real GDP increased from the first quarter of the year (2017). But the real GDP is expected to decrease within the next four years. Based on the given data, the rate of increase for real GDP is decreasing from 2.9% to 1.9% by 2020. This is a problem because the higher the percentage increase, the better the economy is in the long run. The unemployment rate is currently 4.1%. Currently, the unemployment rate is in a good position because it is below the natural rate of unemployment, which is 5.0%. The data states that the median unemployment rate for 2017 is 4.3, and is projected to slightly decrease to 4.2% by 2019. The median PCE Inflation rate for 2017 is 1.6% and is expected to increase to

Fiscal policy is the governments spending policies, which influences the conditions economy as a whole. With this policy, regulators can improve unemployment rates; stabilize business cycles, control inflation, and interest rates to control the economy. The government adjusts the spending and tax rates to influence the nation’s economy. The idea is to find the balance between public spending and changing tax rates, by increasing or lowering taxes may cause the risk of causing inflation to rise. If the economy had slowed down, unemployment will go up, so consumer spending will go down and businesses are not making enough profit. If the government decides to raise the economy by decreasing tax, it will give the consumers more money to spend while it is increasing the form of buying services from building roads or schools.

Fiscal policy is defined as the power that the federal government poses that enables it to impose taxes and also spend to achieve its goals in the economy. On the other hand, the monetary policy is maintaining the programs that try to increase the nation’s level of business through regulation the supply of money and credit. Currently, one of the most important roles of the federal government is to regulate and also ensure that there is stability in the economy. Through the use of both policies options, there is a goal of increasing and decreasing the level of business activity in the country. Governments in the world prefer to have a productive growing economy, but an economy can also be too productive where the government may enact policies to slow down the economic growth. This paper will discuss how both the monetary and fiscal policies are used in keeping the unemployment and inflation low while ensuring that the GDP is increasing.

Economies everywhere in the world have fluctuations, there Gross Domestic Product (GDP) is either growing (economic boom) or it is not producing enough and falls into a recession. In a recession, an economy’s GDP suffers two consecutive quarters of negative growth. Personal consumption, government spending and the amount a country imports and exports measure GDP (Amadeo, nd) while Rittenberg and Tregarthen state that personal consumption (C), gross private domestic investment (I), government purchases (G) and net exports (Xn) make up GDP (2009). The most recent recession in the U. S. economy was in

Fiscal Policy involves the use of changes in government spending and taxations to influence the level and composition and aggregate demand in the economic and giving the amount involve is clearly as important implications for business

Fiscal Policy involves the use of changes in government spending and taxations to influence the level and composition and aggregate demand in the economic and giving the amount involve is clearly as important implications for business

Fiscal policy is the government’s plan for spending and taxation (which in the United States is set by the Federal Reserve). Fiscal policy is helping to steer aggregate demand in the desired direction of the economy because the increasing or decreasing in spending and taxes levels influences the economy. Thus, the main goals of this policy are to help the government to manage inflation, employment and the flow of money through the economic system.