After watching the above Videos and Lesson Content on Monetary and Fiscal Policy
ID: 1110874 • Letter: A
Question
After watching the above Videos and Lesson Content on Monetary and Fiscal Policy. Write a reflection essay about how Monetary and Fiscal Policy in the US effect you.
1. Make sure to have an introduction and conclusion to your essay.
2. Discuss the difference between Monetary and Fiscal Policy
3. Who controls each policy, and give specific examples of how it effects your life.
4. Discuss how each policy affects the overall economy in the United States.
Money and Banking Monetary Policy, government and Banking in Economics.
Economic
Explanation / Answer
Introduction:
An economy involves different demand and supply forces that requires proper policy implementation of the progressive growth of the economy. There is a neo-classical economic proposal that demands the minimal or no government or institutional interventions in economic activities and proposes that economy will recover on its own. Though, this approach did not help the economy to come out from the great depression of the 1930s in the USA. It led the economy to come up with two policy initiatives. First policy is the fiscal policy, that is controlled by the government and the second policy initiative is the monetary policy that is controlled by the central bank. It is the Federal Reserve in the case of the economy of the USA. Both policies complement each other for healthy growth of the economy. It affects the people like working class, business men, firms and professionals as these policies work to create new employment opportunities for citizens, keep prices to be stable and offer incentive to firms and entrepreneurs to grow and expand.
Key Differences Between the monetary and fiscal policy:
The monetary policy and fiscal policy are the part of the economy, but work differently. The monetary policy focuses upon the money supply and regulates the economy by controlling the money supply and demand, whereas the fiscal policy controls the spending and taxation policy to regulate the aggregate demand in the economy. Further, the monetary policy controls the federal fund rates, other interest rates and reserve requirements so that banking process is regulated. Besides, the open market operation is also implemented by the monetary policy. In contrast to it, the government also runs social security programs and transfer payments that act as automatic stabilizers in the economy.
Impact of these policies upon the individuals:
Monetary policy involves reduction or increase in the interest rates. It affects the ability of the individual to get the borrowings from the banks. If interest rates are high, people will pay more in the interest rates to the banks. Hence, they will be discouraged. A fiscal policy of the expansionary nature, will create new employment opportunities for the people. Hence, more people will get employed. Besides, the inflation rate is also controlled by these policies. Hence, our purchasing power and value of money is also controlled by these policies.
Impact of these policies upon the economy of USA.
The economy gets a stable and progressive growth. Employment rate increases and unemployment come down. Inflation is controlled and it helps people to spend less money on a particular product. Further, there is a channelization of funds in the economy and taxation policies are kept in such a ways that it contributes to the growth of the economy. Here, the impact upon the economy is the collaborative effects of both the policies. For example, inflation is affected by monetary and fiscal policies both. The interest rate is affected by the monetary policy and taxation related policy is the result of fiscal policy.
Conclusion:
Monetary policy and fiscal policies are the two most important sources that guides the growth and development of economy. An economy always requires the sound and visionary monetary and fiscal policies. These policies complement each other for effective results.