Unit 8 Discussion: Stabilizing The Economy

As you have learned in Unit 8 (this week), monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard:

a. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy?

b. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy?

c. What specific fiscal policy tools would you use to stimulate aggregate demand and how?

d. What specific monetary policy tools would you use to stimulate aggregate demand and how?

e. What is your conclusion, should policymakers use the monetary and or fiscal policy to stimulate aggregate demand? Explain briefly.

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