Fiscal policy is: Monetary policy is:
Expansionary fiscal policy is: The Federal Reserve increases the money supply by:
Contractionary fiscal policy is: The Federal Reserve decreases the money supply by:
Pros of expansionary fiscal policy:
Cons of expansionary fiscal policy: Pros of increasing the money supply:
Cons of increasing the money supply:
Pros of contractionary fiscal policy:
Cons of contractionary fiscal policy: Pros of decreasing the money supply:
Cons of decreasing the money supply:
- Fiscal policy involves government spending and taxation to influence economic conditions.
- Monetary policy involves controlling the money supply and interest rates to influence economic conditions.
- Expansionary fiscal policy involves increasing government spending and/or cutting taxes.
- The Federal Reserve increases the money supply by buying government securities or lowering interest rates.
- Contractionary fiscal policy involves decreasing government spending and/or raising taxes.
- The Federal Reserve decreases the money supply by selling government securities or raising interest rates.
Pros of expansionary fiscal policy:
- Stimulates economic growth and reduces unemployment.
- Can help during a recession or economic downturn.
Cons of expansionary fiscal policy:
- Can lead to inflation if the economy is already at full employment.
- Can increase government debt and interest payments.
Pros of increasing the money supply:
- Lowers interest rates and stimulates investment.
- Can help during a recession or economic downturn.
Cons of increasing the money supply:
- Can lead to inflation if the economy is already at full employment.
- Can weaken the currency and reduce international competitiveness.
Pros of contractionary fiscal policy:
- Controls inflation and prevents overheating of the economy.
- Helps maintain fiscal discipline and reduce government debt.
Cons of contractionary fiscal policy:
- Can lead to higher unemployment and slower economic growth.
- May be politically unpopular due to cuts in government spending or tax hikes.
Pros of decreasing the money supply:
- Controls inflation and prevents overheating of the economy.
- Can help maintain the value of the currency and reduce trade imbalances.
Cons of decreasing the money supply:
- Can lead to higher interest rates and slower economic growth.
- May be disruptive to financial markets and investment.