Answer to Question #219461 in Macroeconomics for Dawitee

Question

Critically examine the monetary and fiscal policies highlighting their various tools

Answer 1

Monetary policy represent decisions and actions taken by the Central Bank to make sure the supply of money in the economy is consistent with growth and price objectives set by the government. There its objective is to maintain price stability in the economy.

Monetary policy tools include: the reserve requirement, open market operations, the discount rate, and interest on reserves.

Fiscal policy is policy that helps the government to adjusts its level of spending and tax rates to monitor and influence the economy of the nation. Fiscal policy tools are taxes and spending.