Question
Asked Oct 14, 2019
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When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy?

please also include the reference for this question. 

 

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Expert Answer

Step 1

The government can stabilize the economy with the help of Monetary and Fiscal Policy.

Fiscal Policy: It refers to the decision of the government regarding spending and taxation.

Monetary Policy: It refers to the decision of the central bank regarding the amount of money supply in the economy.

Step 2

The use of fiscal policy is appropriate when the government wants to stimulate growth in the economy. Under fiscal policy government can increase the spending on goods and services and this will increase the demand for goods and services in the economy and to meet increased demand for goods and services production must increase and to produce mor...

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