a) Discuss monetary policy and fiscal policy by comparing and contrasting their effects in the short run and in the long run. b) Why do we say that monetary policy is neutral in the long run? If so, why is it being used and considered as useful? c) Can we say that fiscal policy is neutral as well?

a) Discuss monetary policy and fiscal policy by comparing and contrasting their effects in the short run and in the long run. b) Why do we say that monetary policy is neutral in the long run? If so, why is it being used and considered as useful? c) Can we say that fiscal policy is neutral as well?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 30RQ: Under what general macroeconomic circumstances might a government use expansionary fiscal policy?...

See similar textbooks

Related questions

Q: What is the difference between monetary policy and fiscal policy ? Explain

A: Monetary policy is regulated by the central bank of country,whereas fiscal policy is regulated by…

Q: What is the crowding out effect? Discuss the effectiveness of fiscal policy under the crowding out…

A: Answer: Step 1: The crowding-out effect refers to the decline in private investment due to fiscal…

Q: An intended goal of expansionary fiscal policy and an easing of monetary policy is Select one: a.…

A: Hey, Thank you for the question. According to our policy, we can only answer 1 question per session.…

Q: Solve the attachment

A: The monetary policy is implemented using the tools of interest rates, open market operations, and…

Q: What are the major / high level differences between fiscal policy and monetary policy?

A: The fiscal or monetary policies are the tools of the economy to correct the distortions that takes…

Q: Compare and contrast both fiscal policy and monetary Policy

A: Answer: Comparison: Fiscal policy Monetary policy Fiscal policy is undertaken by the government…

Q: What is the reason why fiscal policy should be in tune with monetary policy when the economy is in…

A: Recession is a period of time in an economy when there is low or slow growth in economy wherein the…

Q: is monetary policies in dealing with the consequences of recession is better than the use of fiscal…

A: Monetary policy is the government policy which leads to changes in money supply which helps in…

Q: Suppose the Central Bank of Bothnia buys Treasury Bonds. What will be the impact on the price level…

A: The fiscal and monetary policies are used by the government to achieve certain economic goals. The…

Q: What is differance between Tools of monetary policy and fiscal policy?

A: Fiscal policy refers to the government policy that stabilizes the economy through bring changes in…

Q: what is fiscal policy, monetary policy and its advantages and disadvantages?

A: The fiscal policy is the way by which a government adjusts its spending levels and tax rates to…

Q: What is the Difference between Monetary & Fiscal Policy Fiscal Policy Monetary Policy Who? Who?…

A: Who?Fiscal policy decisions are made by congress and the presidentStatement 6th Monetary policy…

Q: Differentiate between monetary and fiscal policy.

A: Monetary policy: When the policy measures are being taken by the central bank of a country in order…

Q: Which policy is more effective—monetary policy or fiscal policy? Why?

A: The monetary and fiscal policy, both are the way or process to balance the economic activities in an…

Q: a) Discuss monetary policy and fiscal policy by comparing and contrasting their effects in the short…

A: (a) Monetary Policy An expansionary monetary policy causes the output to rise, the price level to…

Q: Why is monetary policy chosen over ﬁscal policy as the preferred tool for stabilization policy

A: Monetary and fiscal policy are the two most well-known techniques for affecting a country's economic…

Q: differences between Monetary and Fiscal Policy

A: Monetary Policy refers to the measures taken by the monetary authority to control the supply of…

Q: Most economists agree that individual consumers and business cannot pull the economy out of a severe…

A: AT some extent this statement is true because economy is big where larger numbers of buyers and…

Q: Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of…

A: Monetary policy refers to policy that affects the cost and availability of credit in an economy.…

Q: Which of the following accurately compares discretionary fiscal policy and monetary policy? a) They…

A: The intersection of aggregate supply curve and the aggregate demand curve determines the…

Q: _________________ formulates fiscal policy and _______________ formulates monetary policy (what…

A: Fiscal policies refers to policies formulated by the government which influence an economy through…

Q: Describe the fiscal stimulus packages and monetary policy interventions initiated by policymakers in…

A: The main aim of the fiscal stimulus package is to boost economic growth by creating employment…

Q: What is the best combination of fiscal policies and monetary policies for a country like Japan whose…

A: The aggregate demand (AD) and aggregate supply (AS) model explains the marker equilibrium where the…

Q: Compare and contrast the strengths and weaknesses of fiscal policy and monetary policy

A: fiscal policy is the government tools to correct the instability of the economy . whereas monetary…

Q: Some reject stimulus measures and all current policy forms. These economists Focus on the damaging…

A: The private sector market structure is an economic model in which individuals, private corporations,…

Q: Which answer choice represents a fiscal policy rather than a monetary policy? A lowering the money…

A: Option C is a Fiscal Policy measure. Rest all three are Monetary policy measures. Monetary policy…

Q: Fiscal policy consists of tools used by the Central Bank to control the quantity of money in the…

A: Fiscal policy is the policy in which government modifies the spending levels and taxes to control…

Q: Monetary policy is subject to longer ________ lags than fiscal policy. A. Decision and…

A: The time it takes for the government and central bank to react to an adverse macroeconomic event…

Q: How is monetary policy linked with fiscal policy? Comment.

Q: Please provide two similarities and two differences between fiscal policy and monetary policy

A: Monetary and fiscal policy are important macro-economic tools of the economy. Both these policies…

Q: In what ways does the Fed utilize their monetary policy tools to affect or counter-balance fiscal…

A: Fiscal policy refers to the method of government spending and tax policies to take a control over…

Q: What is the crowding out effect? According to monetarists, what is the effectiveness of fiscal…

A: Crowding out: Expansionary fiscal policies such as increased spending by the government may cause…

Q: If households and firms are pessimistic about the economy and very reluctant to increase investment…

A: When the zero interest rate policy does not make economy to move out of recession, the expansionary…

Q: Explain the monetary policy and fiscal policy and the differences between them. Comment on the…

A: The monetary and fiscal policies are discretionary policies used by the authorities in a country to…

Q: Define the following: -Inside lag -Outside lag Which has the longer lag-monetary or fiscal…

A: The policy that depicts the control of the money quantity being available in an economy and the…

Q: One of the advantages monetary policy in relation to fiscal policy is that: a. It is easier to…

A: Monetary policy : The Monetary policy of the central bank of a country is to control money supply…

Q: How is monetary policy linked with fiscal policy? Comment.

A: The monetary and fiscal policies are independent of one other but new challenges, in turn, call them…

Q: The 'automatic mechanism' can best be described as using fiscal or monetary policies to stabilize…

A: Automatic Mechanism is also known as self correction.

Q: What is the ideal balance between monetary and fiscal policy for a nation like Japan, where prices…

A: The marker equilibrium in which the AD curve crosses the AS curve is explained by the aggregate…

Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

q2.2

2-
a) Discuss monetary policy and fiscal policy by comparing and contrasting their effects in the
short run and in the long run.
b) Why do we say that monetary policy is neutral in the long run? If so, why is it being used
and considered as useful?
c) Can we say that fiscal policy is neutral as well?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

What would happen if expansionary fiscal policy was implemented in a recession but, due to lag, did not actually take effect until after the economy was back to potential GDP?
Explain whether or not you agree with the premise of the Ricardian equivalence theory that rational people might reason: Well, a higher budget deficit (surplus) means that Im just going to owe more (less) taxes In the future to pay off all that government borrowing, so Ill start saving (spending) now. Why or why not?
Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
What is the main advantage of automatic stabilizers over discretionary fiscal policy?
In a recession, does the actual budget surplus or deficit fall above or below the standardized employment budget?
What are some of the ways fiscal policy might encourage economic growth?
What is the main reason for employing contractionary fiscal policy in a time of strong economic growth?
Based on the national saving and investment identity, what are the three ways the macroeconomy might react to greater government budget deficits?