Essay About Fiscal Policy And Monetary Policy

Extra Credit Project
Extra credit project
Our current economic situation is one of the biggest issues in the world. A global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices. A lot of people are suffering from the global recession. Also, government tries to solve these problems. Government suggests two suitable counteroffers which are fiscal policy and monetary policy for solving the global recession. Fiscal policy and monetary policy can be used by the government to influence the economy. These policies also can help people out of the global recession. First article is about fiscal policy and monetary policy. According to the article, fiscal policy entails the use of government spending and tax policies to stimulate or contract macroeconomic activity. When government supplies money to market, government spending stimulates economic activity. Also, cutting taxes helps to consumer keep money during a recession. Moreover, it helps to stimulate economic growth. Therefore, government uses fiscal policy to influence economic activity. It can make price stability, full employment, and economic growth. According to the Keynesian economics, it proposes that adjusting government spending and tax rates are the best ways to stimulate economic activity. However, the current fiscal policy in the U.S. which is expansionary fiscal policy has problems because government spending is higher than revenue. When government spending is higher than revenue, it can make some problems such as continuing of the layoff, decreasing of consumer spending, and less tax revenue. These problems cause deficit growth. Monetary policy influences the economy through the changes in the money supply and available credit. It regulates interest rates and our economy. When technology and real estate booms were experiencing out of control record expansion, consumer and business confidence was at an all time high. As a result, Wall Street and the stock market could create profits. Unemployment rate was also low. According to the Federal Reserve Chairman Alan Greenspan, United States could stop to enter a recession while for the past decade because of monetary policy. However, monetary policy cannot impact on our current economy anymore because it is not decorated to current economic situation. People see our current economic situation positively. They think that the recession was very likely over. The writer said that the current administration needs to stop glorifying our current economic situation and supplying dumping stimulus money to the large corporations. Also, he said that the fiscal policy has to change. I agree about that the fiscal policy has to change for our current economic situation. I think that the fiscal policy will help us out of the recession better than the monetary policy. Even though the monetary policy helped to stop entering the recession in the past, it does not have little or no impact