I feel kinda like an idiot asking, but social studies just aren’t my thing. Can anyone out there explain monetary and fiscal policy, and possibly the pros and cons of each, in simple terms? Much appreciated. 
:rolleyes:
Monetary policy and fiscal policy are two ways the government can influence the economy.
Monetary policy involves the Federal Reserve System (the nation’s central bank) and tries to influence demand by managing the size and growth of the money supply and by managing interest level rates.
With fiscal policy the government tries to control things with taxation and spending. There is the Keynesian approach that is more focused on managing demand. Then there is the approach of “Supply-Side economics” that tries to (surprise!) manage supply.
Is that what you’re looking for? It can get pretty complicated, so I hope this helps. If you want/need more, there will be plenty of folks around here that know more than me and/or are willing to expand on (or correct) what I have above.
Oh and welcome to the board. (I don’t get to say that very often.)
Thanks. That was much easier to assimilate than the 5 pages of gibberish in my text, but details and perhaps examples would be helpful…?
Also, wtf? -->;j
Details and examples of what in particular?
Monetary policy: you know when you hear about “the Fed” lowering interest rates or raising interest rates to encourage growth or slow inflation? That would be an example of monetary policy in action.
Fiscal policy: if the government lowers taxes then (theoretically) consumption will increase. Keynesian policy believes in defecit spending for expansionary fiscal policy and taxing if there is an inflationary gap.
If this is your homework, you should really just use this as a supplement and do yourself a favor and read the five (five? Is that a lot these days??? You can’t possibly be in college – no offense) pages of “gibberish” in your book. Also, asking others to do your homework (if this is your homework and you don’t just need help understanding) is frowned upon around the board.
Yeah, I think before we go further you need to clarify some things. I assume this is for a principles in economics course. If it’s anything more advanced than that and you don’t know these concepts than you should probably switch classes now. Dignan outlined the basics of the two approaches pretty well, so I don’t understand what you’re looking for. Perhaps if you wrote the specific question you are trying to answer. Also, I wouldn’t refer to the pages in your book as “gibberish” because you may very well be talking to the author of said book. 90% of intro econ text books are thorough and well written. If your book happens to truly be in that 10% you need to speak to your professor immediately. If the problem is that you haven’t read your assignment, which I suspect is the case, then you should read it and get it over with so that you don’t fall further behind.
Clarification:
- Yes, I am in high school. This fact has never really bothered me, but if you find it troublesome and there is an age limit for seeking help and knowledge from the Teeming Millions, please let me know, and I’ll say my goodbyes.
- No, you are not doing my homework, but you are helping me understand the concepts I must in order to do it myself.
- I don’t have a professor or a teacher. That’s one of the reasons I came here. I’m taking an online, self-taught course in fundamental economics. I am not behind but about a week ahead of schedule in this class, so don’t worry about that.
- I have read my text. After reading it, I promptly began snoring. It was published by the United States Information Agency in 1991. If Robert L. McCan, former president of the Center for Educational Services Washington, D.C.; Mark Perlman, professor of economics, University of Pittsburgh; William H. Peterson, Lundy professor, philosophy of business, Lundy-Fetterman School of Business at Campbell University, in Buies Creek, North Carolina; John Lucien Ellington, the associate director of the Center for Economic Education of the University of Tennessee at Chattanooga; or Stewart Ramsey, the editor-in-chief of the U.S. Information Agency’s magazine Economic Impact from 1981 to 1990 is among the Millions, I would be delighted to hear from them.
- In the meantime, I’ve found a few other helpful online resources, but many thanks to Dignan for the explanations.
