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Monetary policy
monetary policy is the monetary authority of the country concerned business processes to control the money supply, interest rate is usually targeted. Usually they are objective or objectives include reduction of unemployment and price stability. How to monetary theory that the best monetary policy.
The expansionary monetary policy can be a policy or a contractionary policy. If you increase the money supply in an economy full quickly said that expansionary economic policy and a reduction in total supply of money, or increase leisurely called contraction Policy. Expansionary policy commonly used to combat unemployment in a recession by reducing interest rates. If the contraction fulfillment of the conditions used for inflation by increasing interest rates.
The monetary policy is based on the association’s interest rates are holding. The money can be borrowed, and demand at this price. Monetary policy is a tool that they have power, inflation, exchange rates of foreign currencies, economic growth and unemployment.
The most important thing that policy makers should follow is to have a reliable political and terminate interest rate targets, because not a lot of importance in terms of monetary policy. If an employee believes the price will be higher in the future, then he / she would create a contract with higher wages to meet this high price. So hit the lower wages in wage setting behavior indicates the staff and owners. And while wages and lower employee can not demand-pull inflation is getting smaller wage and cost inflation will not be any employer did not play much money on wages.
FISCAL POLICY
fiscal policy practiced Govt. expenditure and revenue collection, to control the economy. Fiscal policy out of other major policies such as macroeconomic policy and monetary policy, which you can control with the help of economic interest and money supply. The main instrument of fiscal policy: government spending and taxation. Level of transformation and compilation of taxation and government payments can affect the variables in an economy such as the cumulative demand and economic activity levels as resource allocation, income distribution.
Three of view of fiscal policy, neutral, expansionary and contractionary. These are defined above;
• The neutral point of view of fiscal policy implies a balanced economy. This includes higher tax revenue, Govt. costs are fully supported by tax revenue and overall financial results in addition to the neutral economy.
• expansionary fiscal policy point of view, contains a higher government spending than tax revenues.
• In a situation where Govt. spending less than the tax revenue is called contractionary fiscal policy.
government to spend money in different areas, including military, police, education and health fields, as well as government payments to welfare benefits. know the different ways such as taxation, the issuance of new banknotes, internal and external borrowing money, to cover these costs and utilization of budget revenues and the sale of fixed assets. Some economists disagree with the notion that fiscal policy may cover a consequence, it is known as the Treasury View.
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Source by Jawwad Saleem