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In fiscal policy, the president and the American congress aim at increasing price steadiness, elevated employment and maximize the growth of economy through legislating in a way that they increase the flow of money through the economy by regulating its spending and controlling…
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Task: FISCAL POLICY AND MONETARY POLICY In fiscal policy, the president and the American congress aim at increasing price steadiness, elevated employment and maximize the growth of economy through legislating in a way that they increase the flow of money through the economy by regulating its spending and controlling taxation rater by the citizens. Monetary currency involves impaction of the government on value of currency by involving a vital bank such as the Federal Reserve Board in order to gain control over value of currency and cut down on inflation. This way, the bureau changes the way people and businesses spand money and takes control over the economy (Beetsma 246).
The most open similarity between the two policies is that both work together concurrently to control the rate of employment, currency value stabilization and work towards the realization of economic stability in the states. They both optimize economic growth in the states by controlling the flow of currency in the market. When government expenditure is high through the effect of fiscal policy and the economy goes down due to inflation, the Fed, through monetary policy intervenes to reduce inflation and maximize economy growth (Beetsma 327).
The government is the prime body that deals with and regulates the entire economy of its states. The congress therefore makes decisions on which strategy to apply and when appropriate. This mandate of the government over both policies is a major similarity since the government has the mandate to choose between the fiscal policy and the monetary policy whenever any of the two needs to be inculcated to realize economic stability. Both the policies are effective in their own ways.
The monetary policy is oversees and inculcated by the Fed and effects on the slowing down of the growth in the economy of the states. That means the government does involve itself in the realization of this policy. However, the fiscal policy is overseen by the government and is utilized in the boosting of economic growth and stability (Beetsma 256).
The fiscal policy is more influential since it aims at controlling the rate of government expenditure and escalating the flow of money in the economy. It involves government spending and trimmi9ng of taxes, both of which are politically appealing and highly supported as disputed to the momentary policy which does not increase spending but reduces the effective spending by the federal government.
The fed has the highest influence and greatest ability in the influence towards slowing economic augmentation and leading to subsequent employment while countering inflation caused by the fiscal policy. It does this by reducing the rate of expenditure by increasing borrowing rates to discourage people and businesses from excessive borrowing money. The monetary policy, thus, has more influence on the economy than the governments’ fiscal policy. This is because the government can have very meager influence in increasing tax rates and plummeting government spending due to democratic issues (Beetsma 91).
However, the two policies; fiscal policy and monetary policy, function concurrently and have effect on their own different ways. They are effective in that the government uses the fiscal strategy to increase the money flow in the economy which results into possible inflation while the monetary policy is employed by the Fid to curtail inflation caused by the fiscal policy by increasing borrowing rates in the banks and also reducing the flow of money in the economy to curtail inflation and establish currency stability. The two policies, thus, work simultaneously to ensure economic stability in the country by regulating the flow of currency in the markets (Beetsma 168 ).
Works Cited
Beetsma, Roel. Monetary Policy, Fiscal Policies, and Labour Markets: Macroeconomic ... New York: Cambridge University Press, 2004. Print. Read More
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