The Pros And Cons Of Fiscal And Monetary Policy

Spend more money; spend less money. In the economy, there are two main tools in the government and Federal Reserve Bank to help regulate the interest rates: fiscal and monetary policy. Both the fiscal and monetary policies have made an impact by help stimulating or slowing down the economy. the fiscal policy is the government regulates the economy by using its powers to tax and spending money. The monetary policy is the government manages the economy by controlling the money supply through regulation in interest rates. While both policies can help benefit the economy to either increase or decrease the consumer spending, the people are debating which policy is more effective. The most advocate speakers, John Keynes, has recommended …show more content…
However, the fiscal policy unfortunately increases the deficit budget that makes inflation goes high, which eventually makes the people lose their jobs and caused them into recession. Afterwards, the Federalists used this particular example to conclude that the government shouldn’t interfere with helping the economy. They also included the fact the government shouldn’t be in charge of regulating the economy, where they might corrupt the reserve system. In the conclusion, the fiscal and monetary policy can either run the economy which they may help prevent inflation or recession. Keywords: federalists, monetary and fiscal policy Deficit Budget The economy should be regulated by the fiscal policy while the government use its powers to cut taxes and spend money to control the interest rates. By using the fiscal policy in the economy, it can allow the government to increase the input of the money to cause the people to spend more money and create jobs for the unemployment. The fiscal policy was in favor by the policymakers and Congress because they able to manipulate demand in the economy, as they controlling interest rates. The policymakers can either decrease the government taxes when the demand is low, makes the consumers to spend …show more content…
Two of these different policies can create an impact upon the marketing economy where it might help to improve the unemployment, increase consumer spending and to lower interest rates. The fiscal policy was supported by John Keynes that he proclaims the government should control the interest rates by putting more money into the Federal Reserve Bank and also to cut taxes, so the people can able to spend money. Furthermore, he especially claims that President Roosevelt has led the economy out of the Great Depression by using fiscal policy. While the government is cutting income taxes, it creates jobs for the unemployed people and to have a higher working salary. They even make sure that the government will increase or decrease interest taxes, to prevent the economy to borrow money from the banks. In spite of the government is using fiscal policy to cut out income taxes and improve prosperity in the country, it eventually leading the rise of inflation when the government is borrowing too much from the Federal banks and the United States is in the deficit budget. As a result, the people turns to the monetary policy as a way to fix inflation. The Federal Reserve Bank is managing the economy by controlling the interest rates of the markets. The only way to lower inflation is by increasing interest rates to fix the economy. If the Federal Reserve Bank can raise the income taxes on products, it promotes the