8.5 Possible conflicts between macroeconomic policy objectives

Question 1

What is monetary policy?

Answer 1

Using interest rates and other monetary tools to influence consumer spending and AD as well as stablise the economic cycle and keep inflation low

Question 2

What is fiscal policy?

Answer 2

Government changing taxation and government spending to influence economic activity

Question 3

What are the most common conflicts in objectives?

Answer 3

Unemployment v inflation
Economic growth v balance of payments
Economic growth v inflation

Question 4

Which policy did Keynesian economists say should be generally advocated?

Answer 4

Fiscal policy

Question 5

Which policy did Monetarian economists say should be generally advocated?

Answer 5

Monetary policy