ECO203: Principles of Macroeconomics
Instructor: Thomas Westover
While moving a country out a recession there must be consideration of expansionary economic policies as well as expansionary monetary policy. Just to add a little background on fiscal policy, it is when the government uses its great powers to have an impact on the economy. If the government makes the right choices, it will work in the favor of the economy in any situation. When used correctly, they can have similar results in both stimulating our economy and slowing it down when it heats up.(Schmidt, 2014) When it comes to expansionary policy, it comes from central banks which focuses on increasing the money supply in the government. (Schmidt, 2014) Things like pay raises, job security, profit spending and more all push the economy during the expansionary period. During expansionary periods, upbeat expectations of job security, pay raises, and increasing sales and profits stimulate more private spending, pushing the economy further beyond full-employment equilibrium. (Amacher & Pate, 2012) When dealing with monetary policy, it affects the money supply. Monetary policy controls the credit availability from the central bank, which in turn controls the money supply, which then promotes economic growth and stability.(Amacher & Pate, 2012) This paper will discuss the effect that both fiscal and monetary policy has on the removal of the economy out of a recession. It will include the changes in taxes in government spending as well as the effect on aggregated demand, GDP, and employment. When it comes to monetary policy, it will discuss the required reserve ratio is increased or decreased. As wel...
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...rates are high, consumers will be less likely to borrow. In effort to remove the country out of a recession the policies of fiscal monetary should be followed accordingly.
Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc.
Schmidt, M. (2014). A Look At Fiscal And Monetary Policy. Retrieved from http://www.investopedia.com/articles/economics/12/fiscal-or-monetary-policy.asp
Balasubramaniam, K. (2014). How do open market operations affect the U.S. money supply?. Retrieved from http://www.investopedia.com/ask/answers/06/openmarketoperations.asp
Federal Discount Rate.(2014). Retrieved from http://www.investopedia.com/terms/f/federal_discount_rate.asp
Fiscal and Monetary Policy Process.(2014). Retrieved from http://www.econedlink.org/lessons/index.php?lid=352&type=student
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