Monetary Vs. Fiscal Policy

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Monetary Vs. Fiscal Policy, Which is best? There are two separate ways that the economy can be regulated; the two options are fiscal and monetary policy. Both of these policies main goal is to get the economy to be in economic equilibrium. Economic Equilibrium is a condition or state in which economic forces are completely balanced and allows for optimal use of the economy. Then we are faced with the question of if the economy in in an inflationary gap or a recessionary gap. This paper is going to be based primarily around the actions the government should take to get our economy out of the recessionary gap and put it back into equilibrium. A recessionary gap occurs when the level of Real Gross Domestic Product is currently lower then it is at full-employment, which puts downward pressure on prices. This is when it comes time to decide on what actions we want to take, whether they are monetary or fiscal. Monetary policy is the process of the monetary authorities of a country primarily controlling the supply of money available, often targeting a certain rate of interest for the main purpose of promoting economic growth and stability. The Main Official goals usually include relatively stable prices with low unemployment. Discretionary monetary policy on the other hand, uses the Federal Reserve to increase the money supply; this is made possible by manipulating the four tools we learned about. The Federal Reserve uses open market operations when they have to purchase the
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