Question

If you were the leader of a country and you had control of fiscal and monetary policies, what would you likely do with the use of fiscal and monetary policies before the next general election?

Answer 1

Before the next general election a leader who has full control over fiscal and monetary policy of the country will start using expansionary monetary policy and the expansionary fiscal policy. The main objective of the leader will be increasing the personal disposable income of the people in order tk achieve more votes. In order to do this he will expand monetary as well as fiscal policy.

Monetary policy is the policy of the central bank by which it stables the economy in a country by using various tools like bank rate,repo rate, reverse repo rate etc.

Bank rate is the rate at which the central bank lends money to commercial banks for their long term requirements.

Repo rate is the rate at which Central Bank lends money to commercial bank for their short-term requirements against an collateral security.

the leader will ask the central bank to reduce the bank rate and repo rate so that the money supply in the economy will increase and purchasing power will also increase.

Fiscal policy is the budgetary policy of the government through which the government stabilizes the economy. There are various tools like taxes, government expenditure etc.

A tax is a compulsory payment made to the government. There are two types of taxes indirect tax and direct tax.

Before the general election a leader would decrease the existing tax rate in order to increase the personal disposable income of people. As a result purchasing power would be increased.

before the general election the leader would increase the government expenditure in the economy in order to increase the money supply in the economy so that the purchasing power of the people can increase.