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Explain the real business cycle theorists’ views on the proper conduct of monetary and fiscal policies.
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- What impact would an increase in the nation's money supply or the federal government's budget deficit have on the real GDP and price level in the macroeconomy? What phase of the business cycle might this create?What role, if any, does monetary policy play in the Real Business Cycle Model?What are the two main perspectives on how business cycles arise and propagate? What are their key implications for the use of fiscal and monetary stabilisation policies?
- Explain the difference between fiscal policy and monetary policy. What are some of the reasons these macroeconomic policies are used? Elaborate on reasons these policies are used.How does high inflation lead to a recession in the country? Explain the role of the government and the central bank to address the economic recession problem by using appropriate fiscal and monetary policies. Are there any potential problems with such policies?Market participants, including financial institutions, fund managers and corporations, must understand monetary policy setting impacts on economic activity and business cycle. A central bank will typically implement monetary policy settings in order to achieve certain economic outcomes over a business cycle. In order to forecast future economic conditions and business activity, business managers therefore need to understand the business cycle. Briefly describe the principal monetary policy objective of the Federal Reserve and give examples of different economic indicators that may give an insight into the future stages of a business cycle.
- What were the monetary and fiscal policy responses to the Great Recession? Discuss their effectiveness and how the policy contributed to GDP growth.Explain whether policy makers should be more concerned about the economy going into a recession or facing high inflation and why.In detail explain the role of the Government and the Central Bank to address the economic recessionproblem by using appropriate fiscal and monetary policies.
- Many central banks now indicate that their primary objective is to keep inflation at a persistently low rate. If the rate of inflation is persistently low, will this help reduce the instability of the business cycle? Why or why not?Explain the difference between fiscal policy and monetary policy. What are some of the reasons these macroeconomic policies are used?Which of the following is an effective fiscal tool to control inflation in boom times?a) Reducing government spendingb) Increasing government spendingc) Decreasing taxationd) Increasing money supply
