Question

The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. True or false?.

Answer 1

The government has the capacity to influence the level of output in the short run by utilizing monetary and fiscal policy. There exists some disagreement as to whether the government should endeavor to stabilize the economy. The given statement is true.

What is the monetary and fiscal policy?

Monetary policy exists as a set of actions to control a nation's general money supply and achieve economic growth. Monetary policy strategies contain revising interest rates and changing bank reserve conditions. Monetary policy exists commonly categorized as either expansionary or contractionary.

In economics and political science, the fiscal policy exists as the use of government revenue assemblage and expenditure to control a country's economy. Fiscal policy exists the use of government spending and taxation to influence the economy. Governments typically employ fiscal policy to promote strong and sustainable growth and decrease poverty.

To create an economy more stable, active stabilization policy instruments that mitigate the effect of pessimism and optimism waves stand advocated. The waves of pessimism among consumers and businesses show the fall in aggregate demand. This fall in aggregate demand can be partly or fully offset by raising the money supply because the increase in money supply boosts aggregate demand.

The government has the capacity to influence the level of output in the short run by utilizing monetary and fiscal policy. There exists some disagreement as to whether the government should endeavor to stabilize the economy.

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