Keynesianism and monetarism are both ways to stabilize the economy and promote growth when need. In keynesianism, government uses fiscal policy which is a list of policies that government spending and taxing can be used to improve the performance of an economy. The government produces stabilization by taxing and spending yearly plans. Taxing can occur when inflation is high and lowering taxes tends to occur during a high percentage of unemployment. By lowering taxes, it increases disposable income or the party of income that goes to financial responsibilities. When people have more money, they are able to spend more which in return goes into jump starting the economy. Monetary Policy is another policy used in Keynesianism which is a list of protocol designed to regulate the economy by setting the amount of money that is in circulation and controlled interest levels. The Federal Reserve system also known as the central banking system in the U.S. which holds control of this policy. Monetary policy has three tools used my the Federal Reserve to enforce this policy. Reserve Requirement is the first tool that determines the lowest amount of money a bank must possess and is not able to lend out. The second way to enforce monetary policy is by using the discount rate or the interest rank a bank will charge. The f...
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...hey are can cause national debt. This would lead to other countries to lose faith in the dollar resulting in loss or trade and investors. The dollar will be worth less and less if nation is in high debt. People will also be affected, when you have less money you spend and buy less due to increased prices which can causes problems in the economy such as a recession or worse a depression. Budget Deficit calls for the government to let cost exceed national income and use of monetary policy to jump start the economy. The government must be careful when choosing the best way to build the economy up. If the policies fail, they can lead the nation into many problems as stated above. This is why regulating money, trade, and the economy is an important part in government tasks. In the end, citizens want the best policy to promote the U.S. into a stabile and secure economy.
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