Monetary policy is the use of interest rates or control on the money supply by the government or central bank to influence the economy. The Central Bank of every country is the agency which formulates and implements monetary policy on behalf of the government in an attempt to achieve a set of objectives that are expressed in terms of macroeconomic variables such as the achievement of a desired level or rate of growth in real activity, the exchange rate, the price level or inflation, the balance of
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MONETARY POLICY- EGYPT Ankita PGDM-IB(Ist Year ) MONETARY POLICY Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment. Monetary theory provides insight into how to craft optimal monetary policy. It is referred to as either being expansionary or contractionary, where
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way of fiscal and monetary policies should be taken to expand the economy again and increase aggregate demand. Monetary and fiscal policy are two ways in which governments attempt to achieve or maintain full levels of employment, price stability, and economic growth. Monetary policy is the responsibility of the Federal Reserve System, which uses three main instruments: open-market operations, the discount rate, and reserve requirements to manipulate the money supply and interest rates. Fiscal policy
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(Krugman and Wells 2009) a brief explanation of fiscal policy is when the government uses taxes, government transfers and government purchases of goods and services to shift aggregate demand curve to the right to help heal the economy. (Reem Heakal 2010) describes it in simpler terms as the means by which the government adjusts its levels of spending in order to monitor and influence a nation’s economy. It is the sister strategy to monetary policy with which a central bank influences a nation’s money
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1. What is fiscal policy? Fiscal policy is the use of government spending and consumption to influence the economy. We can also summaries fiscal policy as government policy that affects the macroeconomic condition. Government usually uses fiscal policy to improve unemployment rate, control inflation and to promote strong growth in the economy. 2. How can it be used to get the economy out of recession? First, the government may lower the tax rates to increase the economic growth. If less money
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may make changes to the discretionary fiscal policy and that is through the annual budget process or through changes in the tax code. Included in the discretionary spending are programs such as military spending and nearly all other federal departments. To expand the economy, Congress may pass an expansionary fiscal policy which reduces taxes which in theory allows households more disposable income to pump back into the economy. When an expansionary fiscal policy is created, budget deficits are also
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current period’s production measured at the constant prices of a selected base year. Definition of Fiscal Policy - the use of government taxes and expenditure to influence the state of economy. Discretionary fiscal policy is a deliberate action of the government to change the level of government spending and/or the rates of tax so as to affect AD. 1) Expansionary fiscal policy to close a recessionary gap: when a recessionary gap exists, the government can use
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The aggregate demand – aggregate supply model is used by economists to analyze the behavior of the macroeconomy in both the short run and the long run and aggregate demand in general refers to total spending by households, businesses, governments, and foreigners on domestically produced final goods and services. The aggregate demand curve (AD) describes the behavior of buyers of final goods and services in the aggregate. The aggregate demand – aggregate supply model allows us to see what factors
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International Trade and Finance Speech Thank you for attending this conference today. My name is _____, and as a Speaker of the House, I will discuss the current state of the United States macroeconomy. I will further explain topics including the current surplus, effects of international trade in the U.S., tariffs and quotas, foreign exchange rates, and why the U.S. imports. United States Imports Surplus International trade and finance are an important part of the United States’ economy, accounting
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and output falls. The president and Congress could adjust fiscal policy to increase aggregate demand. They could either increase government spending, or cut taxes, or both. 2. Expansionary fiscal policy involves government spending exceeding tax revenue, and is usually used during recessions. If the Federal budget is balanced at the outset, expansionary fiscal policy will create a government budget deficit. Contractionary fiscal policy occurs when government spending is lower than tax revenue
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