Free

Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth - Assignment Example

Comments (0) Cite this document
Summary
1. Austrians consider monetary disturbances to be the primary source of instability in the economy while Keynesians consider fluctuations in aggregate demand to be the main source of instability in the economy (Hansen, 2013).
6. a). If the president of Malawi imposes a 35%…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.2% of users find it useful
Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth
Read TextPreview

Extract of sample "Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth"

MONETARY POLICY, FISCAL POLICY, BUSINESS CYCLES, AND ECONOMIC GROWTH MONETARY POLICY, FISCAL POLICY, BUSINESS CYCLES, AND ECONOMIC GROWTH
1. Austrians consider monetary disturbances to be the primary source of instability in the economy while Keynesians consider fluctuations in aggregate demand to be the main source of instability in the economy (Hansen, 2013).
2. If the rate of the money supply and the velocity of money are kept constant, a higher inflation rate will cause a downward movement along the dynamic aggregate demand curve.
3. In the Solow model, a steady state level of capital means that positive net capital investment continues to drive growth at a constant rate.
4. In the Solow model, an increase in the investment rate will raise the capital needed to attain a steady state of the output.
5. In the Solow model, an increase in savings will cause capital stock to increase.
6. a). If the president of Malawi imposes a 35% tax on foreign direct investment, the amount of foreign direct investment will reduce. Multinational corporations in Malawi will reduce their investments. Foreign Direct Investment stimulates economic growth and reduces the level of poverty. So a decrease in foreign direct investment will increase poverty. Owners of multinational companies in Malawi will receive reduced dividends. Some multinational corporations’ employees in Malawi will either be laid-off or receive lower salaries (Hansen, 2013).
6.b). If the president of Malawi imposes a mandatory minimum wage of $5.00 per hour, workers in multinational companies will receive better pay. Consequently, the level of poverty will reduce in the country. Multinational corporations will incur more cost especially salary expenses. Due to higher costs profits for the companies will reduce thus shareholders will receive lower dividends. Multinational corporations might lessen the number of employees to reduce the salaries expenses they incur (Hansen, 2013).
7. Western states like the United States and United Kingdom resort to deficit spending by borrowing money to stimulate economic growth or recovery in times of economic recessions. The main disadvantage with deficit spending is that it leads to interest rates. High-interest rates reduce the ability to borrow. High-interest rates discourage entrepreneurs to invest. Consequently, low investment rates mean that the production capacity of a country is reduced the general output of the country decreases hence. Reduction in the output of a country reduces the rate of economic growth in a country. Deficit spending means that the government spends more than the private sector. States tend to utilize resources inefficiently. So these actions might lead to wasted resources. Deficit spending and increased borrowing increases an economy’s inflation rate. Increasing inflation rate reduces the value of a currency and adversely affects its competitiveness with other currencies. Inflation will also lessen the amount of savings (Hansen, 2013).
8. Listening to Laurence Kotlikoff of Boston University, I was interested in the argument he brought forward regarding the government’s concealment of its debt obligations. Kotlikoff pointed out that United States federal government resorts to labeling its debts with economic terms to lie to the public that it is in control of its debts but in reality it is not. Kotlikoff provides an example where his 94-year-old grandma receives treasury bills printed with no actual deposits. He emphasizes that this actions might lead to very high rates of inflation in the future.
9. Listening to the podcast, one learns of the government’s techniques in controlling the supply of money in an economy. Kotlikoff clarifies how the government uses the principal plus interest payments made pay retirement benefits to retirees. However, the claims Kotlikoff made on the government’s debt that accumulates to over $200 trillion but reported as $12 million are doubtful.
10. The question I would ask Kotlikoff is how he came up with the total debt of the government that is not reported.
Reference list
Hansen, A. H. (2013). Fiscal Policy & Business Cycles. Routledge. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth Assignment”, n.d.)
Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth Assignment. Retrieved from https://studentshare.org/macro-microeconomics/1685347-monetary-policy-fiscal-policy-business-cycles-and-economic-growth
(Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth Assignment)
Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth Assignment. https://studentshare.org/macro-microeconomics/1685347-monetary-policy-fiscal-policy-business-cycles-and-economic-growth.
“Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth Assignment”, n.d. https://studentshare.org/macro-microeconomics/1685347-monetary-policy-fiscal-policy-business-cycles-and-economic-growth.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth

Fiscal Policy and Economic Growth

...? Fiscal Policy and Economic Growth Macro & Micro economics 1 Introduction The purpose of this assignment is to analyze macroeconomics basic concepts. This assignment is a review of an existing article titled EXCHANGE RATE REGIME TRANSITION DYNAMICS IN SOUTHEAST ASIA by Monzur Hossain. This paper has investigated the currency regime choices of six Southeast Asian Countries. These countries include Indonesia, Korea, Malaysia, Philippines, Singapore, and Thailand. These countries have been examined for the period of 1973 – 99. The dynamics of regime transition are insignificant among a variety of regimes including fixed, intermediate, and floating regimes....
5 Pages(1250 words)Essay

Monetary and fiscal policy

...? Monetary and Fiscal Policy a. What Fiscal Policy Tools could be used to stimulate the Economy? If the real Gross Domestic Product (GDP) is lowerthan the potential GDP, then certain fiscal policy associated tools could be used for stimulating the economy. The tools have been described hereunder. Reduction in Taxes-The governments can opt for reducing the amount of taxes that are imposed on various products. This would not only help in capturing the entire business market, but will also enable effective demand stimulation at large. Increase in Government Spending-This policy helps in...
5 Pages(1250 words)Essay

Monetary and fiscal policy

...?Monetary and Fiscal Policy Monetary and Fiscal Policy If the government imposes tax cuts for 95% of all households, my firm will definitely benefit because governments should bailout companies depending on certain circumstances. Although bailing out by imposing tax cuts for 95% of all households seems as going against the capitalistic concepts that compose economy philosophy of our nation, periods such as the great depression have been there as well as the 2008 economic crash where the direct intervention of the government in the economy comes in handy. My firm is an example of successful bailout in case of tax cuts for 95% of all households including services rendered (Shiller, 2008). If my firm had folded like it was the case... in the...
4 Pages(1000 words)Essay

Fiscal and Monetary Policy

...HOW BRITAIN SHOULD TACKLE ITS RECESSION USING THE FISCAL AND MONETARY POLICY 2000wds: November, 2008 TABLE OF CONTENTS 1 Introduction 1.2 Fiscal Policy 1.3 Monetary Policy 1.4 Fighting the Recession using Fiscal Policy 1.5 Fighting the Recession Using Monetary Policy 1.6 Conclusion and the Way Forward 1.0 Introduction The goals of monetary policy are a low rate of inflation ("price stability") and a small gap between actual real GDP and potential real GDP (Farinha & Marques 2001)....
10 Pages(2500 words)Essay

Monetary and fiscal policy

...U.K Fiscal and Monetary Policy and how it affects IS/LM model Each government has a way of trying to make its country’s economy the most stable one in the world. To achieve this, there has to be a balance in the market forces and equilibrium has to be achieved. In this process, the government formulates various policies like the monetary policy and fiscal policy that would influence the economy of the country. Monetary policy is the attempt to control macro economic variables in an economy (primarily inflation) through the use of interest rates. In...
4 Pages(1000 words)Essay

POLICY IN THE UNITED STATES(FISCAL POLICY AND MONETARY POLICY)

...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...
2 Pages(500 words)Essay

Fiscal and Monetary Policy

...28th March, Active Fiscal and Monetary Policy Fiscal policy is a government’s tool to exercise control over its expenditures and the revenues whereas monetary policy deals with the strategies made by the central bank in the form of open market operations and the change in the interest rates. There are mainly two kinds of policies which are used by the government and the central bank jointly which are referred to as active and passive policy. Active Policy At the times of recessions or the times when economy is at its struggling stage, active policy...
2 Pages(500 words)Essay

Fiscal and Monetary Policy

... eased problems related to negative economic growth (Mattich, 2014). On the other hand, the observation has been that the three pronged Abenomics approach of expanding the money supply as evidenced by the bond purchase, the increasing of the taxes on consumption in the long term, and the stimulation of growth in the economy also in the long term may work, even as the country had been able to pull out of a condition of general deflation of prices that has plagued the country in the last decade. So the prognosis is that these fiscal and monetary policy measures making up Abenomics will continue to work and should be supported. Abenomics can be regarded as being made up of both fiscal policy and monetary policy approaches to solving...  Table...
5 Pages(1250 words)Essay

Economic & Monetary Policy

...Monetary, Economic Policy Table of Contents China’s Economy and Monetary Policy Comparing China and Japan China Recommendations China Alternative Policy References China’s Economy and Monetary Policy There is some debate as to whether or not China is doing enough in terms of shoring up its economy in the face of unprecedented slow growth and whether or not its recent monetary policy changes are enough to get the Chinese economy back on the road to the levels of growth that it had become accustomed to over the decades. The...
3 Pages(750 words)Essay

Monetary policy&fiscal policy

...Monetary Policy and Fiscal Policy Summary of the Monetary Policy Article Federal Reserve recognized that the rate of economic growth was not so fast and the central bank decided to continue purchasing bonds at the rate of $85 billion per month as offered in Fed’s program, as a way of stimulating the economy. Jim Zarroli from NPR in his explanation of whether the program has anything to contribute towards the direction of the economy declined to it having much contribution stating that the view of Fed in the economy is concerned about what has been for some time. He views this as being middling. He notes...
2 Pages(500 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Assignment on topic Monetary Policy, Fiscal Policy, Business Cycles, and Economic Growth for FREE!

Contact Us