Why did Keynes believe that Fiscal Policy was more powerful/effective than Monetary Policy?

Solutions

Expert Solution

According to Keynes believe that fiscal policy was more effective and power than monetary policy .The major reason for this considering major factors like employment and demand and output.
And also his point of view the period of recession the government should cut down the taxes and also increase the spending because of the need of economy recovery.
So here get the relevance of fiscal policies.
The short period more effect is powerful in the case of fiscal policy than monetary policy which is long term nature and that result got from that way.so The government spending,taxes etc are major factor in the economy.so As per the Keynes rule that fiscal policy is more effective in each time when the monetary policy is ineffective.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Why did Keynes prefer Fiscal Policy to Monetary Theory? How can they work together? What is...

Why did Keynes prefer Fiscal Policy to Monetary Theory? How can they work together? What is the Liquidity Trap for Keynes? Does it apply to the economy today?

Why does a flexible exchange rate make monetary policy more effective but fiscal policy less effective?

What is liquidity trap? Why was Keynes in favour of fiscal policy as compared to monetary...

What is liquidity trap? Why was Keynes in favour of fiscal policy as compared to monetary policy? (100 words)

Fiscal policy is usually: 1) more political than monetary policy. 2) less political than monetary policy....

Fiscal policy is usually: 1) more political than monetary policy. 2) less political than monetary policy. 3) neutral like monetary policy. 4) having the same impact on all citizens. Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect: 1)a shift to the right in the supply curve of Hondas and lower prices for Hondas. 2)a shift to the left in the supply curve of Hondas and higher prices for Hondas....

Explain why the timing of fiscal policy may be more difficult than the timing of monetary...

Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

Explain whether monetary policy can be changed more quickly than fiscal policy and why. During COVID19...

Explain whether monetary policy can be changed more quickly than fiscal policy and why. During COVID19 pandemic both fiscal and monetary polices were used by many governments. Describe whether there were significant time differences in the use of either policy and why the difference if any.

How effective is monetary policy? Answer this question from the perspective of (a) keynes, (b) the...

How effective is monetary policy? Answer this question from the perspective of (a) keynes, (b) the classical economists, (c) the monetarists and (d) modern money theory . How would you judge “ effectiveness”?

Why is fiscal policy more effective in the Keynesian model when interest rates are at 0?...

Why is fiscal policy more effective in the Keynesian model when interest rates are at 0? Show this graphically with the money market graph.

9. “Under fixed exchange rates the monetary policy is impotent, but the fiscal policy is effective.”...

9. “Under fixed exchange rates the monetary policy is impotent, but the fiscal policy is effective.” Do you agree? Explain. 10. “Chronic budget deficits mean ever-accumulating, unsustainable public debt.” Do you agree? Explain why or why not. Make sure to address the following questions in your essay: a. What is the relationship between public deficits and debt? b. What is meant by “sustainable debt”? How do you know whether the public debt sustainable? c. How is it possible for chronic...

Explain how policy lags are more of a problem for fiscal policy compared to monetary policy.

Subjects