Topics: Monetary policy, Public finance, Tax Pages: 3 (794 words) Published: January 13, 2014
December 25, 2013

Crisis with the Monetary and Fiscal Policy Effect

Monetary policies are authorized to control the money supply and targets interest rates to promote the growth and stability of the economy. So what happened I think that the interest rates went up? When they go up many consumers don’t want to over spend or lose out on money and profits from high interest rates. Another that might happened also is the supply of money being misrepresented. The policy I think played a role also in this crisis is contractionary fiscal policy. This policy play a big part in government spending is lower than tax revenue and undertaken to pay government debt. Certain implementations can cause an effect on this crisis. Crisis Management was an implementation that was used in this crisis. It involves reacting to an event once it has occurred. Getting lower interest rates also helped the economy in order for the money flow to inflate for different services and products to be bought and sold from consumers to get the employment rate back up and money supply growing for the economy. I think the solution can work for a long-term if crisis management and money flow get to flowing. It’s too early to say much about the crisis because it takes years to get an economy back on track.

Fiscal policies changes the level and composition of taxation and government spending. Contractionary fiscal policy was in effect due to this crisis because it slow down economic growth when inflation is growing rapidly. To fix this the President submits a budget to Congress that sets the tone for the coming year's fiscal policy by outlining how much money the government should spend on public needs, such as defense and health care; how much the government should take in in tax revenues; and how much of a deficit, or surplus, is projected. Congress then reviews...

References: www.monetary and fiscal policies.com
Brimer, M, 2013, retrieved on 12/23/2013 from http://newsinfo.inquirer.net/41753
Editorial Board.  (2011). Macroeconomics.  Retrieved from http://wow.coursesmart.com/C001150000087/firstsection#X2ludGVybmFsX0J2ZGVwRmxhc2hSZWFkZXI/eG1saWQ9OTc4MTkzNDkyMDU0MS8x
The World Factbook.  (n.d.).  GDP- per capita (PPP).  Retrieved from http://www.cia.gov/library/publications/the-world-factbook/fields/2004.html
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