Stabilizing the Economy

  Monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard: 

  • Start with a brief introduction that explains use of Government policy to control the economy.
  • When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
  • When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.
  • What specific fiscal policy tools would you use to stimulate aggregate demand and how?
  • What specific monetary policy tools would you use to stimulate aggregate demand and how?
  • What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.

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