Macroeconomics: Theory and Policy

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Monetary Policy and Fiscal Policy

After studying this topic, you should be able to understand

• Monetary policy aims at achieving certain well-defined macroeconomic objectives.
• To achieve the objectives of monetary policy, the central bank has at its disposal the quantitative and the qualitative measures of monetary policy.
• The effective working of monetary policy is hindered due to the existence of different obstacles.
• Fiscal policy refers to the government’s policy regarding government expenditure, taxation and public borrowing with the view to achieving certain well-defined macroeconomic objectives.
• To implement fiscal policy, the government has at its behest several instruments which include taxation, government expenditure and public ...