Answer to Question #96949 in Economics for Vidisha

Question

Discuss the extent to which fiscal policy rather than monetary policy is a better way to cause economic growth?

Answer 1

Fiscal policy is a government`s decision regarding spending and taxing whereas monetary policy is central bank`s actions and communications to manage the money supply in an economy. The two policies are useful tools to influence economic growth, promote full employment and keep inflation in check. Fiscal policy possesses some unique advantage over monetary policy because it helps to reduce the budget deficit therefore it is a better cause of economic growth.