Term 1 Unit 8 Discussion

Term 1 Unit 8 Discussion

Unit 8 DB: Stabilizing the Economy (ECO201 Macroeconomics)

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:

· Start with a brief introduction that explains use of Government policy to control the economy.

· When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.

· When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both.

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

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

· What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.