Question

Why does the government make changes to monetary policy?

Question 3 options:

A)

to promote stability


B)

to influence politicians


C)

to pressure businesses


D)

to enforce the law

Answer 1

The correct answer was

A) to promote stability

Answer 2

• Fiscal policy involves changing government spending and taxation. It involves a shift in the governments budget position. e.g. Expansionary fiscal policy involves tax cuts, higher government spending and a bigger budget deficit. Government spending is a component of AD.
• Monetary policy involves influencing the demand and supply of money, primarily through the use of interest rates.
• Monetary policy can also involve unorthodox policies such as open market operations and quantitative easing.
• Monetary policy is usually carried out by an independent Central Bank^
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