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What evaluation points could you argue for fiscal, monetary and supply side policies?
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#2
(Original post by Blyts-_)
What evaluation points could you argue for fiscal, monetary and supply side policies?
What evaluation points could you argue for fiscal, monetary and supply side policies?
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#3
Time lag as the above said as well as
FISCAL
costly to government
time
MONETARY
can work against government policies/goals
time
SUPPLYSIDE
takes a looong time to work (google time lag for details)
also costly
that's very brief but expand with application and talk about extent etc and you'll be fine
FISCAL
costly to government
time
MONETARY
can work against government policies/goals
time
SUPPLYSIDE
takes a looong time to work (google time lag for details)
also costly
that's very brief but expand with application and talk about extent etc and you'll be fine
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#4
Contrasting macroeconomic objectives...
eg. Increased G -> widens budget deficit (G>T), increased AD -> demand pull inflation (may rise above 2% target.
eg. Increased G -> widens budget deficit (G>T), increased AD -> demand pull inflation (may rise above 2% target.
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#5
(Original post by Blyts-_)
What evaluation points could you argue for fiscal, monetary and supply side policies?
What evaluation points could you argue for fiscal, monetary and supply side policies?
Monetary Policy normally liquidity trap issues or time lags.
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#6
(Original post by Zürich)
With Fiscal you're normally thinking about Inv/Cons crowding out and 2nd round effects
Monetary Policy normally liquidity trap issues or time lags.
With Fiscal you're normally thinking about Inv/Cons crowding out and 2nd round effects
Monetary Policy normally liquidity trap issues or time lags.
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#7
(Original post by Blyts-_)
What evaluation points could you argue for fiscal, monetary and supply side policies?
What evaluation points could you argue for fiscal, monetary and supply side policies?
Fiscal :
Increase Government spending = Increase already huge budget deficit
Higher tax, may actually reduce government intake after optimal has been reached (Lorenze curve)
Crowding out effect
Increase in AD, may be inflationary (under neo-classical assumption)
Opportunity cost - expensive
Time lags
Monetary :
Again low interest rate (potential for Inflation)
Deflation renders interest rate changes ineffective as there can only be a positive real rate of interest.
Liquidity trap (after recession) interest rates may be low but saving rates are high
High interest rates (Hot money influx) leads to stronger exchange rate (Bad for exports)
Dependent on consumer/business/bank confidence
Supply-Side :
Investment projects funded by government are expensive
Would only really be useful if a country is operating nearer its productive potential (PPF)
Opportunity costs
Time lags
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