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Government spending can be a useful economic policy tool for governments. Fiscal policy can be defined as the use of government spending and/or taxation as a mechanism to influence an economy. [13] [14] There are two types of fiscal policy: expansionary fiscal policy, and contractionary fiscal policy. Expansionary fiscal policy is an increase ...
Expansionary monetary policy lowers interest rates, increasing economic activity, whereas contractionary monetary policy raises interest rates. In the case of a fixed exchange rate system, interest rate decisions together with direct intervention by central banks on exchange rate dynamics are major tools to control the exchange rate.
Monetary policy is often referred to as being either expansionary (stimulating economic activity and consequently employment and inflation) or contractionary (dampening economic activity, hence decreasing employment and inflation).
A statement on the government's website said the State Council had approved a plan to invest 4 trillion yuan in infrastructure and social welfare by the end of 2010. [5] [6] This stimulus, equivalent to US$586 billion, represented a pledge comparable to that subsequently announced by the United States, but which came from an economy only one third the size. [7]
Fiscal policies or monetary policies by the government, which are contractionary in nature: A contractionary policy is a tool usually used to tame rising inflation. Excessive use of tightening policies, e.g. too rapid increases in interest rates, can reduce demand and consumer spending for goods and services, leading to a recession (creating a ...
Contractionary fiscal policy, on the other hand, is a measure to increase tax rates and decrease government spending. It occurs when government deficit spending is lower than usual. It occurs when government deficit spending is lower than usual.
To curtail Unemployment, we would use Expansionary monetary policy which would do the same as above. In order to cure the Current account deficit in the economy, we need to increase the exports by a devaluation , that would, in turn, help in increasing the employment by creating more jobs.
Merriam-Webster's Dictionary named the word austerity as its "Word of the year" for 2010 because of the number of web searches this word generated that year. According to the president and publisher of the dictionary, " austerity had more than 250,000 searches on the dictionary's free online [website] tool" and the spike in searches "came with ...