Scribd Logo
Upload

Welcome to Scribd!

  • 37 views

    Should Monetary and Fiscal Policymakers Try To Stabilize The Economy?

    Uploaded by

    Khushi Nahar
    Monetary and fiscal policymakers aim to stabilize economies but face challenges. While theory suggests they should balance economies, implementing policies takes time. Reforms can take months or years to impact demand. Politicians may unintentionally amplify rather than minimize economic fluctuations by delaying the effects of their decisions. The authors argue that all major economic downturns, including the Great Depression, stemmed from destabilizing government policies of the past.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Should Monetary and Fiscal Policymakers Try To Stabilize The Economy?

    Uploaded by

    Khushi Nahar
    37 views2 pages
    Monetary and fiscal policymakers aim to stabilize economies but face challenges. While theory suggests they should balance economies, implementing policies takes time. Reforms can take months or years to impact demand. Politicians may unintentionally amplify rather than minimize economic fluctuations by delaying the effects of their decisions. The authors argue that all major economic downturns, including the Great Depression, stemmed from destabilizing government policies of the past.

    Original Title

    Eco asynch

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Monetary and fiscal policymakers aim to stabilize economies but face challenges. While theory suggests they should balance economies, implementing policies takes time. Reforms can take months or years to impact demand. Politicians may unintentionally amplify rather than minimize economic fluctuations by delaying the effects of their decisions. The authors argue that all major economic downturns, including the Great Depression, stemmed from destabilizing government policies of the past.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    37 views2 pages

    Should Monetary and Fiscal Policymakers Try To Stabilize The Economy?

    Uploaded by

    Khushi Nahar
    Monetary and fiscal policymakers aim to stabilize economies but face challenges. While theory suggests they should balance economies, implementing policies takes time. Reforms can take months or years to impact demand. Politicians may unintentionally amplify rather than minimize economic fluctuations by delaying the effects of their decisions. The authors argue that all major economic downturns, including the Great Depression, stemmed from destabilizing government policies of the past.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 2

    Should Monetary And Fiscal Policymakers Try To Stabilize The Economy?

    Left on their own, economies begin to fluctuate. When households and businesses scale back
    on investment, overall demand for goods and services falls. A contraction of this magnitude
    has little economic value to society. Workers who lose their employment as a result of falling
    aggregate demand would choose to live. The advancement of macroeconomic theory has
    shown to policymakers how to lessen the severity of economic volatility. The economic
    slump is a waste of money, and people who are laid off would rather have been making
    quality products and selling them for a profit. It is a boom-bust phenomenon, and there is no
    need for humanity to struggle through the booms and busts of the cycle.

    In theory, monetary and fiscal policy should be used to balance the economy, but in reality,
    both policies face significant challenges. Many reports find that monetary policy reforms
    have no impact on aggregate demand until around six months after they are implemented. A
    big reform in fiscal policy will take years to propose, approve, and execute. Very many,
    politicians attempting to balance the economy unwittingly escalate economic volatility, as
    seen in the 1930s, the authors argue. The authors conclude that policymakers must anticipate
    the economic circumstances that will prevail as their decisions take place, which is difficult
    to predict. The author concludes that policymakers can unintentionally amplify rather than
    minimise the severity of economic fluctuations. The economists argue that all of history's big
    economic fluctuations, including the Great Depression, can be traced back to destabilising
    legislative decisions, such as those implemented by the United States government in the
    1920s and 1930s.

    Should The Government Fight Recessions With Spending Hikes Rather


    Than Tax Cuts?

    As John Maynard Keynes wrote The General Theory of Employment and Money in the
    aftermath of the Great Depression, the 1930s were the greatest economic crisis in US history.
    Since then, analysts have maintained that the primary issue during recessions is insufficient
    aggregate demand. When the central bank lowers interest rates, it lowers the cost of credit to
    fund construction schemes such as new plants and higher house costs, which directly
    contributes to aggregate demand. The Fed cannot lower interest rates and people would rather
    save their cash than sell it at a negative interest rate. Turning to monetary policies to
    maximise the government's capacity to slash taxes is the most important weapon for boosting
    the economy. The central bank cannot limit the amount of money spent by the government
    unless it raises the number of individuals who are unable to purchase it. The government is
    unable to reduce its spending on basic products and services, which raises demand for
    government-issued goods. The more customers who purchase it, the more money it spends.

    Tax reductions have a major impact on both overall demand and aggregate supply. One of
    Kennedy's main economic initiatives was a tax cut, which was finally signed into law by
    President Johnson in 1964. When Reagan became president in 1981, he also signed major tax
    cuts into law. With increased aggregate supply, the output of goods and services will rise
    without increasing the rate of inflation. It is unclear if the government will spend money
    wisely and prudently during recessions.

    You might also like