A Better Global Understanding Of The Economic Crisis Essay examples

944 Words Nov 10th, 2014 4 Pages
In order to tackle such a specific and technical questions, it will be easier to get a better global understanding of the situation if I briefly describe both policies individually at first and then explain how the two are organically linked. First of all a monetary policy is the action by which the monetary authority, usually the central bank, controls the money supply in order to fulfill it’s goal of triple stability, namely that of the interest rates, the stability of prices and exchange rates. It also strives to achieve other goals of economics policy, such as the Keynesian triangle: growth, full employment and external stability. Since the beginning of the 2008 economic crisis, central banks have increasingly resorted to more unconventional policies, better known as quantitative easing.

On the other hand, a fiscal policy refers to the changes in the taxation and public spending. The government uses it to achieve social goals or individual behavior changes. Because it is extremely difficult to predict future economic condition, economists recommend letting the stabilizers do the job, as “discretionary” policies have by the past been unsuccessful and only contributed to increasing government debt. The two major components of the fiscal policy are government spending (social spending, aid to businesses, public infrastructure, aid for research, tax exemptions, increased public employment…) and revenues (the level of tax rates and tax bases, the overall level of taxation…

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