Macroeconomic Policies Of Fiscal And Monetary Policies Essay

CHAPTER ONE 1. INTRODUCTION 1.1 Background of the Study Governments make use of different macroeconomic policy instruments such as fiscal and monetary policies to stabilize the macro-economy and brig about growth to their respective countries. Yet there are debates on the efficiency of each of these instruments. Some economists argue that fiscal and monetary policies are ineffective in all countries while the other group argue that they are important policy tools, though their effectiveness depends on conditions in the economy. Fiscal policy is one of the commonly used instruments for achieving the goals of growth and stability in the economy through enforcing monitoring mechanisms. The components of fiscal policy include: government expenditure, tax, and public debt (Permechand 1983). The contradicting arguments about effectiveness of fiscal policy amendments or government involvement still continue in these sections too. Public expenditure refers to the expenditure incurred by the government for the maintenance of various public good and to promote the welfare of the society as a whole. It is the main instrument used by governments especially in developing countries to promote economic growth which is an essential component for sustainable development (MOFED 2010). However, composition of government expenditure has been attracting the attention of economists due to its effects on the level of growth (Sharma B. 2012). Economic growth is expected to bring about a betterShow MoreRelatedMacroeconomic Policy : Monetary And Fiscal Policy1030 Words   |  5 PagesMacroeconomic Policy: Monetary Fiscal Policy Monetary policy is used by the Fed to regulate the supply of money and credit in the economy. The purpose of monetary policy is to promote maximum employment, maintain the price of goods, and to control long-term interest rates to increase economic growth. 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