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These tools moves the economy out of recession by affecting the money supply, interest rates, spending, aggregate demand, gross domestic product and employment.
The goal of every economy is to operate at full employment equilibrium. The policy which can do the job of stabilising the equilibrium output to the full employment level is known as stabilisation policy. There are two types of stabilisation policy. They are fiscal policy and monetary policy. Fiscal policy refers to any change in ‘fisc’ which means treasury. In a broad sense the change in fisc is brought about by changes in the revenue -expenditure policy of the Fed. Summary of revenue and expenditure can be represented by the government budget. The budget has two elements : tax revenue (T) constituting the major source of government revenue and government expenditure (G). The monetary policy refers to any change in money supply brought about by the monetary authority. One of the most important way in which the monetary authority can affect the credit market is open market operations (OMO). In OMO the Fed makes sales and purchases of Government securities in open market.
Another instrument of the monetary policy is the change in the required reserve ratio. The required reserves are the minimum balance that the Fed requires a bank to hold in the vault cash or on deposit with the Fed. The percentage of such deposits are called the required reserve ratio. The third instrument is the discount rate. Changes in the discount rate occur when The Fed changes the rate of interest on loans (Tucker,2008).
In order to analyse the effects of fiscal and monetary undertaken by The Fed we consider commodity, money and labour
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Central banks also acts as the government banks bank and the government lend or borrows through it. It also acts as the lender of last resort to the financial sector during the financial crisis. It is through the central bank that the government borrows from the public through the issue of treasury bonds and bills.
The author of this research informs that political partisanship plays a critical role in the formulation and implementations of monetary and fiscal policies in the U.K. Arguably, every political party pursue different monetary policies. Politics therefore plays a critical role in influencing and enacting financial policies of a state.
Influence of different economic factors on the current state of the American airline industry is considered in the essay. State of the market, where airline companies operate is examined. Impact of the monetary and fiscal policies on the industry is assessed. Effects of international trade on the industry is also evaluated.
The proponents of this view also dispute that cutting costs in comparison to raising taxes would play out as a more effective method of heightening the economic development and in the least reduce misinterpreted contractions. The above arguments in most instances refer to the recent empirical studies of deficit decrease across nations around the world.
The radical change has brought the understanding of the most important roles that are to be played by the federal government, which includes the role of regulating and stabilizing the economy of the country. The terms monetary and fiscal policy have almost a similar meaning but with only a slight difference.
Poverty, a state that is defined as lack of certain amount of vital materials or money, is categorized into absolute and relative poverty. Absolute poverty entails the lack of basic human needs that includes clothing, health care, shelter, sanitation, food and education.
This paper focuses on the qualitative evaluation of U.S. current economic policies towards Asian economies. In the age of globalization, the growth of the developed nations became sustainable and the scope for progress of the developing nations improved. The changes in the state of affairs in US greatly affected the Asian economies.
This being the case, what will be the economic effects, both in the short- and long-run, according to the AS-AD model
In order to understand the AS-AD model, we must first understand the inherent relationship between aggregate supply and aggregate demand.
A decade ago, the current account surplus of the country was at 2% of the Gross domestic Product while the reserves in foreign exchange were at 14% of the same or 166 billion dollars. In the year 2010, the current account surplus of the country was above 5% of GDP,
This policy will lead to increase in demand in the market in order to enhance economic growth. The expansionary fiscal policy will consist of:
The Expansionary Fiscal Policy should be used with the objective of stabilizing prices,
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