Please discuss the need and use of fiscal policy in countries such as the UK during the crisis. Will the fiscal policy remain the key policy instrument in these sorts of countries in the near future? In what way is monetary policy constrained and might that constraint be relaxed? In the case of fiscal policy, how should it be altered to support economic recovery?

Please discuss the need and use of fiscal policy in countries such as the UK during the crisis. Will the fiscal policy remain the key policy instrument in these sorts of countries in the near future? In what way is monetary policy constrained and might that constraint be relaxed? In the case of fiscal policy, how should it be altered to support economic recovery?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Rolse And Effects Of Government

Section: Chapter Questions

Problem 9QP

See similar textbooks

Similar questions

Do you think the typical time lag for fiscal policy is likely to be longer or shorter than the time lag for monetary policy? Explain your answer?
Suppose that, instead of relying on monetary policy, the government intends to take an active role in restoring the economy to the original equilibrium by pursuing an expansionary fiscal policy. How much should government spending change by? With the help of graphs, explain very carefully, the impact of this policy on the economy.
What is the difference between monetary policy and fiscal policy? Provide at least three examples of monetary policy? Provide at least three examples of fiscal policy? Give an example of monetary and fiscal policy from the past year in response to Covid?
What is the importance of fiscal policy during times of economic recession? What is the reason why fiscal policy should be in tune with monetary policy when the economy is in the recession phase? How important is the Central Bank in the financial market?
Explain what kind of fiscal policy and what kind of monetary policy are likely to reduce GDP.
It’s probably fair to say that for many years fiscal policy has been the poor relation to monetary policy in macroeconomic policy making circles. Now it is back in vogue. In their recent assessment of the economic impact of the pandemic, the World Bank (p56, 2021) concluded, for advanced economies such as the United Kingdom (UK), that, “With monetary policy increasingly constrained, fiscal policy has taken on a critical role in macroeconomic stabilization during the crisis, delivering unprecedented stimulus in 2020 in the form of cash transfers and income support to households and firms.” Firstly, explain how monetary and fiscal policy is implemented and how they can be used to influence GDP and the price level. Secondly, the quotation above highlights the unprecedented use that has been made of fiscal policy in countries such as the UK during the crisis. Briefly consider whether fiscal policy will remain the key policy instrument in these sorts of countries in the near future.
What specific monetary policy tools would you use to stimulate aggregate demand and how? What specific fiscal policy tools would you use to stimulate aggregate demand and how?