Inter Office Memoramdum - Essay Example

In response to your query about the type and effectiveness of an economic policy as a large part of campaign, here I am presenting the following details that will give you an insight about the pros and cons associated with each policy and the basic complementary things associated with each courses of action. In order to have a control over finance, there are two courses of action namely Fiscal Policy and Monetary Policy. These are basically two separate, yet equally important strategies by which we can enact and control our finances and can stabilize economics fluctuation (Iwamoto, 2005, p.3). This came into play mainly after the Great Depression of the 1930’s when it was necessary to regulate how and what was happening financially, how money was being taken in and then later spent, how budgets were enacted, how banks could conduct business, and so forth.

Following paragraphs give detail about both Monetary Policy and Fiscal Policy. The process by which the government, central bank, or monetary authority manages the supply of money or trading in foreign exchange markets is referred as Monetary Policy. Monetary Policy is based on the relationship between the rates of interest in an economy, that is the price at which money can be borrowed and the total supply of money. It employs a variety of tools like monetary base, reserve requirements, discount window landing and interest rates to control the price at which money can be borrowed or the total supply of money hence influences the outcomes of economy like economic growth, inflation, exchange rates with other currencies and unemployment.