Fiscal Policy and Monetary Policy Free Essay, Term Paper and Book Report
Fiscal Policy and Monetary Policy
The government uses various tactics to keep the economy stable. One of these tactics is the implementation of the Fiscal policy. The fiscal policy deals with the governments expenditure and taxation practices. The fiscal policy is operated with budgets deficits or surpluses to create a stable economy. When the budget is in a surplus situation the government increases the tax rates and reduces its spending. This is done to prevent inflation from occurring. Inflation occurs when there is a lot of excess money flowing around; this causes the values of products to drop and their thus their prices rise to create a profit. The opposite is true if the budget is in a deficit. If this is true then the government will increase its spending so that more money enters the market and reduces the rates of taxation to allow the public to have enough money so that there is money to go into the market.
Monetary policy is the use of money supply and credit (via interest rates) to create economic stability. The idea behind this policy is; when there is an increase ......
Word Count: 599
Page Count: 2.3 (250 words a page / double spaced)
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