Fiscal Policy Paper

Topics: Monetary policy, Central bank, Keynesian economics Pages: 4 (625 words) Published: January 9, 2015


Fiscal Policy Paper
Learning Team B
ECO/372 – Principles of Macroeconomics
University of Phoenix
December 11, 2014
Dr. Robert Boggs

Fiscal Policy Paper
What is fiscal policy? Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation’s economy. It is the sister strategy to monetary policy with which a central bank influences a nation’s money supply. In this essay, we take look at how fiscal policy works, how it must be monitored and how its implementation may affect different people in an economy. ("What Is Fiscal Policy", 2014)

When the economy begins to suffer from serious recession or inflation, politicians will almost intervene to try to improve the situation. Their interventions may or may not be good economics – often they are not. – But you can hardly blame the politicians for trying. Nobody wants to go down in history like Herbert Hoover, the president who became a widely hated figure for failing to use the government aggressively enough to try and end the Great Depression. Politicians were hoping to improve economic conditions with two main tools at their disposal. Fortunately for them, the basic principles behind them are pretty simple. The core thinking is that inflation and recession are opposites of one another but during the periods of recessions, there is not enough money circulating in the economy. During the periods of inflation, there is too much money which is the answer to these problems which is to either put money in or take money of the economy. Helping and maintaining fixed exchange rates and policy independence, the central bank must ensure that the international quantities are supplied and that demand are equal to the existing exchange rate. The ability to conduct expansionary monetary and fiscal policies are limited if there is a country with fixed exchange rates, because many other countries official reserves are...

References: What is fiscal policy? (2014). Retrieved from
http://www.investopedia.com/articles/04/051904.asp
Colander, D. C. (2013). Economics (9th ed.). Retrieved from
http://newclassroom3.phoenix.edu/Classroom/#/contextid/OSIRIS:44486377/context/co/view/activityDetails/activity/430adad2-27c6-42e2-9b96-7aec82ea6765/expanded/False.
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