Monetary And Fiscal Policy And The Great Recession

801 words - 4 pages

The goal of monetary and fiscal policy is to create and maintain a growing stable economy. While both policies deal with manipulating the economy, which entity uses them and the tools they use are what differentiate them from each other. When it comes to monetary and fiscal policy, the details and timing matter because they can save a country, or they can destroy a country.
Monetary policy is about controlling the supply of money in attempts to create stable growth in a country. Monetary policy is usually classified one of two ways, expansionary policy and contractionary policy. The goal of expansionary policy is increasing the total supply of money rapidly. The goal of contractionary ...view middle of the document...

S banks’ lending at, and this will dictate how much money is coming in and going out of the banks. They can also control the money supply through open market operations. This is when the fed buys debt or treasury from the bank which increases the money the bank has to lend out. The Fed can also use a discount window; this is when the banks borrow from the reserve. By controlling the rates that banks borrow money from the reserve they can control how much the banks are borrowing and at what interest rates, thus how much the banks are lending. The last tool the Fed uses to influence the economy using monetary policy is reserve requirements. This is when the Fed sets a requirement of how much money a bank must have in the vault. If this requirement is lowered banks can lend out more money, if it is raised the banks can’t lend out as much money. This keeps the money out of circulation and puts a stop on the money supply.
Fiscal policy is how the government influences the economy by using taxation and spending. There are three main types of fiscal policy. The first is neutral fiscal policy which is used when the economy has reached the equilibrium. This is when everything balances out spending is equal to taxation and the budget is balanced. Expansionary...

Find Another Essay On Monetary and Fiscal policy and The Great Recession

Fiscal and Monetary Policy Essay

1128 words - 5 pages AND FISCAL DEFICIT part one is categorical that in order to raise the economy and GDP levels the president and federal government will have to apply both monetary and fiscal policy that are complement of each other. A fall in the FED rate increased government spending, improved welfare spending, a drop in both FED and tax rate all works together to overturn balance between government spending and its revenues from taxes . This tool is a prototype

Fiscal and Monetary Policy Essay

798 words - 4 pages equipment necessary to run those applications. This action alone is reported to have reduced operating costs by $27 million over five years. Furthermore, websites such as USASpending.gov have been created, enabling taxpayers to review spending obligations by Federal agencies (Cutting). The Board of Governors of the Federal Reserve established its monetary policy of keeping interest rates at or near zero percent after the financial crisis

Fiscal and Monetary Policy and Economic Fluctuations

990 words - 4 pages approximately 10 percent loss in the price of the bond. Nonetheless, the Federal Reserve has kept the interest rate on long-term bonds to an unexpected low through its unconventional monetary policy. This implies that the main reason for the current interest rates is the unconventional monetary policy i.e. quantitative easing regarding the purchase of huge amounts of Treasury bonds and other long-term assets. On the contrary, the unemployment rate has

Fiscal Policy, Monetary Policy, and a Healthy Gross Domestic Product

1773 words - 7 pages appropriate monetary policy and in the absence of further shocks to the economy. Monetary policy can have an important impact on aggregate demand and ultimately on the GDP. Projections show that the deficit for fiscal year 2011 will be close to $1.4 trillion, or roughly 9 percent of GDP, a level comparable to deficits recorded in 2009 and 2010 but sharply higher than the deficits recorded prior to the onset of the current recession and the

In the Wake of the Great Recession: Long-Term Effects of Fiscal Policy

2183 words - 9 pages evaluate the economic stimulus efforts used by the U.S. government in response to recessions, the Great Recession included. Fiscal policy measures can have impacts on economic growth and government spending. Additionally, implications have been noted when fiscal policy is utilized as part of expansionary policy. Economic growth can be affected by changes in various taxes, such as corporate income taxes and personal taxes. Changes in corporate

Monetary Policy vs. Fiscal Policy

1991 words - 8 pages Monetary Policy vs. Fiscal PolicyPeople always struggled with an idea of prosperity and success, whether it was a personal goal or whether it was something major - like wealth of a country. Nowadays, we are studying a science, which is really significant and valuable - Economics. Economics is a tool for achieving those goals, knowledge that people can use and imply in real life, and at the present time probably undividable part of governments

Discuss the methods that the government uses to communicate its monetary and fiscal policy and the barriers it may face

1046 words - 5 pages within the business. External communication within an organisation is very important because they are dealing with a people from outside of the company. For external communication, the Government usually uses the media, news channels, campaigning, posters or leaflets to communicate its monetary and fiscal policy to get the message across. This is the one way communication where the sender never can be sure whether the message was understood and

Unemployment and the Great Recession

1568 words - 6 pages The largest cause of unemployment can be attributed to recession. The term recession refers to the backward movement of the economy for a long period. People spend only when they have to. (Nagle 2009). With people spending less there would be less money in circulation therefore, enterprises would suffer financially and people would suffer too. This is so because recession reduces the fiscal bases of enterprises, forcing these enterprises to

UK Monetary and Fiscal Policies

2676 words - 11 pages Since the global financial crisis of 2008, the UK government has been implementing various policies to combat the recession and stimulate economic growth. This essay will look at how effective the fiscal and monetary policies used since the crisis are in achieving the four-macro economic objectives. In addition, I will provide my input on the best way the UK government can carry out these policies. Monetary policy affects the aggregate demand

immigration and fiscal policy

903 words - 4 pages potentially affect their budget balances. With immigration reform we would more likely experience a net fiscal gain. Economists broadly agree that immigration would in fact be great for the earnings and productivity of the immigrants themselves. It often has a net benefit for the economy as a whole, even with some winners and losers. This is called the “immigration surplus.” It’s also proven that immigrants, including illegal immigrants are not socially

schwarzenegger and fiscal policy

1803 words - 7 pages fiscal crisis has been in the making for nearly a quarter of a century, going back to 1978 with the passage of Proposition 13, a ballot initiative supported by right-wing Republicans that severely limited the levying of property taxes. The main beneficiaries of the measure were not struggling homeowners but big corporations and the wealthy, and the measure led to a huge attack on social spending through the slashing of state revenues. The collapse of

Similar Essays

Fiscal And Monetary Policy Before During And After The “Great Recession” Of 2008

874 words - 4 pages One of the most interesting facets of The Great Recession of 2008 is that it didn’t really begin in 2008. The fiscal and monetary policy that prompted what we know now as the Great Recession of 2008 really began in 2006 and 2007. What was happening then and why did it take so long for the nation to feel the recession? The answers to those questions explain a great deal about how the Federal Reserve Bank operates and how the different ideologies

The Great Recession Fiscal Policy: Analyzing Problems And Solutions

1879 words - 8 pages . The most significant problem noted within the relevant literature is the lack of research relative to the estimated long-term effectiveness of only the fiscal policy implemented following the Great Recession. The U.S. government can implement both fiscal and monetary policies to stimulate the economy. Following the Great Depression, the U.S. government not only implemented fiscal policies, it used monetary policy as well (Blinder & Zandi, 2010

Fiscal And Monetary Policy Essay

1223 words - 5 pages The difference between fiscal and monetary policy lies within the different tools wield, and aspects of the economy they influence. Fiscal policy generally deals with different sorts of taxes to manage earnings and spending in the population, and how the government benefits from these interactions. Monetary policy, on the other hand, affects the base value and amount of money in circulation directly, as opposed to simply leveling off amounts

Monetary And Fiscal Policy Essay

1413 words - 6 pages Monetary and fiscal policy and their applications to the third world countries with a huge informal sector This essay seeks to explain what are monetary and fiscal policy and their roles and contribution to the economy. This includes the role of the government in regulating the economical performance of a country. It also explains the different features and tools of monetary and fiscal policy and their performance when applied to the third