Fiscal Policy And Monetary policy

Question 1

What is Fiscal Policy?

Answer 1

Government decisions on taxation and public spending to influence economic activity.

Question 2

What is Monetary Policy?

Answer 2

Actions by the central bank to control money supply and interest rates to manage inflation and economic stability.

Question 3

What are the effects of Expansionary Fiscal Policy?

Answer 3

Lower taxes & higher government spending → boosts demand & employment.

Question 4

What are the effects of Contractionary Fiscal Policy?

Answer 4

Higher taxes & lower government spending → reduces inflation but slows growth.

Question 5

What are the effects of Lower Interest Rates in Monetary Policy?

Answer 5

Increases borrowing & investment → boosts growth.

Question 6

What are the effects of Higher Interest Rates in Monetary Policy?

Answer 6

Reduces borrowing → controls inflation.

Question 7

What is the role of the ECB?

Answer 7

Controls interest rates and money supply in the Eurozone to maintain price stability.