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advantages of monetary policy over fiscal policy

It can boost the export levels for the national economy. Fiscal Policy vs. Monetary Policy Fiscal policy refers to the actions of a government—not a central bank—as related to taxation and spending. One of the drawbacks of fiscal policy is the time elapsed between the recognition of the need for action until it actually happens. It could discourage businesses to expand. 2. Monetary policy tools encourage consumer activities based on the current status of the economy. In addition, taxes on negative externalities decreases consumption of negative externalities or demerit goods. Monetary policy and fiscal policy are not equally good as ways to stimulate the economy. 6. Your country’s importer companies will face the real threat. 1. Measures taken to rein in an \"overheated\" economy (usually when inflation is too high) are called contractionary measures. A fiscal policy is the measures that a government takes so as to stabilize its economy. Its ability to cut interest rates is not a guarantee. What is one of the advantages of monetary policy over fiscal policy. What is the major advantage of monetary policy over fiscal policy Offered Price: $ 2.00 Posted By: solutionshere Posted on: 03/21/2016 06:06 PM Due on: 04/20/2016 Below the fiscal policy advantages and disadvantages have discussed respectively. Central banks can use the monetary policy to weaken the overall currency value on the global stage. It would also mean that consumers will be able to settle their monthly payments regularly—a win-win situation for creditors, merchandisers and property investors as well! The increased demand from the government for borrowed funds can potentially raise interest rates and crowd out others who do not wish to pay the higher rates. Basically, the agency decides how much interest rates would be imposed on banks in terms of borrowing, where banks would also be the ones to determine how high these rates will they be asking from the borrowers. One of the advantages of monetary policy over fiscal policy is that: a. As monetary policy would lower interest rates, it would also mean lower payments home owners would be required for the mortgage of their houses, leaving homeowners more money to spend on other important things. According to experts, changes that are made for a monetary policy might take years before they begin to take place and make changes felt, especially when it comes to inflation. C) the Fed can react more quickly than the legislature can. Since the central bank can operate separately from the government, this will allow them to make the best decisions based upon how the economy is performing doing at a certain point in time. When monetary policy is general in nature and impersonal in impact, the fiscal policy, in contrast, is selective. Its fine if you can only do one aspect of the policies ( like either advantage or disadvantage ). During elections, the controversial issue of monetary policy is ironically avoided by hopeful candidates, who would talk about other matters except for this subject. 4. 1. Answer: Monetary Policy: It helps to limit the flow of money in order to reduce problems of unemployment, inflation and to stabilize business cycle. In contrast to fiscal policy, which quickly stimulates additional money into the economy as governments increase spending for government programs and public projects, monetary policy actions take time to work their way through the economy, especially a large modern economy such as that of the U.S. and other world economic powers. Evaluate the advantages and the disadvantages of the current fiscal policy and monetary policy in USA.? They have the expertise and the security to do what is best for the country even if it is not politically popular. Monetary policy in normal times is 3. While each is invaluable in stabilizing economic activity, monetary policy possesses some unique advantages not available to fiscal policy. 3. Proponents of expansionary monetary policy state that even if banks lower interest rates for consumers to spend more money during a global recession, the export sector would suffer. Thomas Metcalf has worked as an economist, stockbroker and technology salesman. With this policy, interest rates can still increase, making businesses not willing to expand their operations, resulting to less production and eventually higher prices. Monetary and fiscal policies offer useful tools to influence economic growth, promote full employment and keep inflation in check. Advantages and disadvantages of government using fiscal or monetary .. Its other goals are said to include maintaining balance in exchange rates, addressing unemployment problems and most importantly stabilizing the economy. Because well… coupla reasons… 1. Which of the following is considered an advantage of monetary policy compared to fiscal policy. It does not guarantee economy recovery. Monetary policy is designed to be different. Monetary and fiscal policies offer useful tools to influence economic growth, promote full employment and keep inflation in check. It allows for the imposition of quantitative easing by the Central Bank. Advantages of using fiscal policy is that it can significantly impact the national income and therefore have immediate effect on the economy. Chapter 17 - Interest Rates and Monetary Policy 115. Plus, prices of commodities would also be lowered, so consumers will have more reasons to purchase more goods. And when decisions are made, action is immediate. The need is discovered, Congress debates it, different versions of a bill must be reconciled between the House and Senate, the President must sign the bill into law and then the law -- spending or taxing -- is implemented. Also, the banks would operate based on hard facts and data, rather than the wants and needs of certain individuals. According to the National Bureau of Economic Research, it began in December 2007, and the country was only able to enact the … Interest rates are controlled to promote overall economic growth. In the US, the Federal Reserve System is the agency executing monetary policy, which can either be contractionary or expansionary, with the former aiming to slow down the supply and even limit it to prevent the devaluation of assets and slow down inflation and the latter increasing the supply of money by lowering loan interest rates to encourage businesses to expand and cut down unemployment rates during recession. In an expansionary monetary policy, where banks are lowering interest rates on loans and mortgages, more business owners would be encouraged to expand their ventures, as they would have more available funds to borrow with affordable interest rates. It promotes political freedom. 1. Its other goals are said to include maintaining balance in exchange rates, addressing unemployment problems and most importantly stabilizing the economy. It is not that useful during global recessions. Its relative isolation from political pressure. Policy measures taken to increase GDP and economic growth are called expansionary. Their autonomy gives them freedom not granted to elected officials. Advantages and disadvantages both are needed. Economists who criticize the Federal Reserve on imposing monetary policy argue that, during recessions, not all consumers would have the confidence to spend and take advantage of low interest rates, making it a disadvantage. As inflation essentially makes an impact on the way we spend money and how much money is worth, a low inflation rate would allow us to make the best financial decisions in life without worrying about prices to drastically rise unexpectedly. Similarly, subsidizing merit goods or public goods will increase the consumption. 5. Assume the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad. 4. Based on the ones listed above, what do you think? Advantages of Fiscal Policy• Can have a significant impact on the Economy• Can be discriminating which allows different regions or consumption habits to prosper• Makes the distribution of income fairer through progressive taxes and benefits 13. When a stimulus is necessary to keep growth happening, then banks can lower their interest rates on lending products to encourage additional spending. The fiscal policy ensures that the economy develops and grows through the government’s revenue collections and government’s appropriate expenditure. Expansionary fiscal policy refers to reducing taxes and increasing government spending to stimulate the economy. Since they were placed in office by the electorate, they must be responsive to the voters if they are to keep their jobs. If there is a delay in the implementation of the fiscal policy, it might reduce the effectiveness of the policy… A primary advantage is the speed with which changes can be implemented. Fiscal policy inevitably involves borrowing money. It involves changing the allocations and levels of government expenditures and taxes. 3. So, decisions should be taken wisely. Even then time is required for the desired effect to take place. A monetary policy is a process undertaken by the government, central bank or currency board to control the availability and supply of money, as well as the amount of bank reserves and loan interest rates. Explain the difference between monetary and fiscal policy. The strengths of monetary policy compared to fiscal policy are generally thought to include all of the following except greater: 116. currency board or the government to control the availability of money and its supply as well as the interest rates on loans and the amount of bank reserves While the fiscal policy is framed and implemented by the government with regulation of its spending and collection of revenue, the monetary policy is controlled by the central bank of the country (in India, it … This situation is a problem of: 117. Some advantages of using the fiscal policy are: They are specific and can stimulate specific growth. Traditional monetary policy (that is, lowering the short-term interest rate) has two key advantages over traditional fiscal policy: It does not add to the national debt Because many governments have–however c The Federal Open Market Committee, a major policy-making part of the Fed, can, too. 1. Likewise when it wishes to stimulate the economy its actions have no impact on the debt. Monetary policy must be approved by Congress, which prevents bad monetary policy from taking effect b. It can bring out the possibility of more investments coming in and consumers spending more. Fiscal policy is that it is not politically popular rein in an \ '' overheated\ '' economy ( usually inflation! Ltd. / Leaf Group Ltd. / Leaf Group Ltd. / Leaf Group /. General in nature and impersonal in impact, the banks would operate based on the develops. This subject, let us take a look at its advantages and have... 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