Fiscal and Monetary Policy Essay Example | Topics and Well Written Essays - 500 words

fiscal and Monetary Policy - Essay ExampleTherefore, it would be government who has to come forward and prepare a discretional fiscal and monetary policy in collaboration with the central bank to reduce the expansionary or contractionary gap.On the other hand, the pundits of passive policy assumes that the current position of parsimoniousness is quite stable much(prenominal) that the market forces can better interact with each other to achieve the equilibrium in the providence due to the presence of automatic stabilizers in the economy.Active policy is quite famous among the policymakers due to the accompaniment that by apply this approach the economy can be steered to a particular direction in quick times. The combat-ready policy is mainly utilized by the existing presidents just before the elections in order to gain some short term advantages so that their chances of being elected for the next advance can be increased. Another important strength of this approach is that gener ally this approach is presented to the public in a very decent manner by the central bank and the government, but in reality, both these institutions heavily emphasize on the passive approach which is the core tool behind stabilizing the economy after recessions. This policy can provide its best of the results when some sheered expert policymakers are given the ensure to formulate a policy to come out of the recession. When those policymakers sit together and think, they can use active policy as their premier tactic which can bring stability to the economy.The weaknesses of this policy mostly skip over out the strengths of active policy because of considerable difficulties which arises when this policy is to be formulated. The biggest weakness of this policy is the difficulty in estimating the future output level of the economy and the unemployment rate. Both these factors are hard to foresee and identify beneath this approach. Another important weakness