1) What were the monetary and fiscal policy responses to the "Great Recession"? 2) What were...
1) What were the monetary and fiscal policy responses to the "Great Recession"?
2) What were some of the reasons suggested for why those policy responses didn’t seem to have as large an effect as anticipated on unemployment and GDP growth? Be specific and provide examples.
3) What can policy makers do to address the next (or current) recession? (This is particularly relevant given this past weeks massive stimulus bill.)
4) Should policy makers actively work to manage fluctuations in the business cycle, or does political involvement only make those fluctuations worse?
Homework Answers
1)
During the great depression , the aggregate demand is low in depression phase of economy. Monetary and fiscal policy can be used to address the problem of depression.
Durjnf the depression , government went for the expansionary fiscal policy. Expenditure level was increased and taxes were reduced to drive up aggregate demand.
Expansionary monetary policy was also pursued but fed was not much active its role was minimum, hence it can not influence the market significantly. Huge dependency was on the fiscal policy.
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