Answered

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1. During a recession, what specific actions in fiscal policy will the government do to help the economy? What specific actions in monetary policy will the Fed do to help the economy?


2. During an inflationary period and heated economy, what specific actions in fiscal policy and monetary policy will be expected?

Sagot :

Answer:

1.

Specific fiscal policies

increase government spending

reduce taxes

Specific monetary policies

open market purchase

lower interest rate

2.

Specific fiscal policies

reduce government spending

increase taxes

Specific monetary policies

open market sale

increase interest rate

Explanation:

Recession is when the GDP of two consecutive quarters is negative. the goal of policies at this time would be to increase spending

Inflation is a persistent rise in the general price levels. The goal of policies would be to reduce money supply

Discretionary fiscal policies are deliberate steps taken by the government to stimulate the economy in order to cause the economy to move to full employment and price stability more quickly than it might otherwise.

Discretionary fiscal policies can either be expansionary or contractionary

Expansionary fiscal policy is when the government increases the money supply in the economy either by increasing spending or cutting taxes. Expansionary fiscal policy should be carried out in a recession. Cutting taxes increases disposable income and spending  

Contractionary fiscal policies is when the government reduces the money supply in the economy either by reducing spending or increasing taxes. This should be carried out in an inflationary period

Monetary policy are policies taken by the central bank of a country to shift aggregate demand.

There are two types of monetary policy :

Expansionary monetary policy : these are polices taken in order to increase money supply. When money supply increases, aggregate demand increases. reducing interest rate and open market purchase are ways of carrying out expansionary monetary policy

Contractionary monetary policy : these are policies taken to reduce money supply. When money supply decreases, aggregate demand falls. Increasing interest rate and open market sales are ways of carrying out contractionary monetary policy

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