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Can you please explain monetary policy & fiscal policy and what are the effects of both of them on the economy?
On this topic, there is a chapter in Kaplan Book where it says that students are going to be tested. Therefore, can you please explain them to me?
Thanks in advance!
Both of these are revision from Paper BT (was F1) and would only be asked in Section A of the exam (and not involving calculations).
Monetary policy is where the government attempts to control their economy by managing the amount of money in the economy. The main ways they do this is by setting interest rates and by limiting the amount that banks are allowed to lend.
Fiscal policy is where the government attempts to control the economy by deciding how must money to raise from taxes and how to spend the money raised.
Could you please tell me more about monetary policy & fiscal policy that what effects does it have on the economic sectors if any of the policy is adopted by the government and how does it affect the exchange rate?
How these policies are used to tackle growth in the economy & inflation?
And please explain whether raising the interest rate is favorable to the government or lower interest rate is favorable? And how it is defined whether to raise it or lower it?
You cannot expect me to effectively type out a textbook here for three reasons – one is that you already have what you need written in your textbook, second is that so much detail is not needed for Paper FM, and thirdly you should already have studied all of this for Paper BT (or as part of your degree course if you were exempt from Paper BT).
If you want more then do watch our free Paper BT lectures covering the chapters on Macroeconomics.
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