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Monetary and fiscal policy

Economics · Lesson 4 of 5

Lesson 4 of 5

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Lesson 4 of 5 · Economics

Monetary and fiscal policy

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Describe the objectives of monetary policy and fiscal policy and explain how they are used to influence output, employment, and inflation.
Explain the monetary transmission mechanism and evaluate the effects of policy rate changes, reserve-related tools, and central bank balance sheet actions on money, credit, and aggregate demand.
Distinguish expansionary from contractionary monetary policy and fiscal policy and determine their likely effects on real GDP growth, inflation, interest rates, and budget balances.

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Explain the challenges and limitations of monetary and fiscal policy, including policy lags, crowding out, debt sustainability concerns, and the zero lower bound or low-rate environment.

Compare the likely macroeconomic effects of different policy mixes under recessionary, inflationary, or balanced economic conditions.

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