Question

explain/examine how both governments’ cash rate (monetary), expenditure and tax (fiscal) policies were used to impact economic outcomes and manage the GFC

Answer 1

The measures which are taken by the central bank of country inorder to monitor the supply of money as a result to achieve sustainable growth of the economy are termed as monetary policies.

The way in which a government varies its expenditures and the tarrifs inorder to control the economy of a country are termed as fiscal policies.

The monetary and fiscal policies are tools that are used to measure the future stage of an economy and to control the issues. Inorder to control the flow of money and interst rates within an economy, exact forecasts have to be made by the monetary authorities.

These policies had a great effect in the lives of people in an economy. It may result in inflation if the government thinks that the economy is grown highly enough. Due to this, government lowers the spending expenditure and as result the total production within economy become worsley affected. It will highly affect the people since they will have only lesser money to buy or invest in the market.

Inflation is one of the great effect caused due to the monetary and fiscal policies. If the rate of the main funds had been lowered by the financial authorities, thus the demand for products increases and it will finally result in high costs and wages. Then it will a great or higher demand of raw materials and labors. This totally affects the current or future economic performances within an economy and may leads to inflation.

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