A Presentation on

Fiscal and Monetary Policies in line with Macroeconomic and Microeconomic theories

PREPARED BY:
Ashesh Palikhe (NPI000011)

MBA
Managerial Economics
MB033-3-M
Submitted to
Asia Pacific University
Technology Park, Malaysia
Analyzing Fiscal & Monetary Policy with
different economic theories
BY ASHESH PALIKHE
NPI000011
Defining Fiscal Policy
 Fiscal policy is the means by which a government adjusts its spending levels
and tax rates to monitor and influence a nation's economy.
 It is the sister strategy to monetary policy through which a central bank
influences a nation's money supply.
 Using a mix of monetary and fiscal policies, governments can control
economic phenomena.
Defining Monetary Policy
 Monetary policy refers to the actions undertaken by a nation's central bank
to control money supply and achieve sustainable economic growth.
 Monetary policy can be broadly classified as either expansionary or
contractionary.
 Tools include open market operations, direct lending to banks, bank reserve
requirements, unconventional emergency lending programs, and managing
market expectations—subject to the central bank's credibility.
Microeconomics VS Macroeconomics
Fiscal and Monetary Policy
Effects on Economy
 These policies are powerful tools that the government and concerned
monetary authorities use to influence the economy based on reaction to
certain issues and prediction of where the economy is moving.
 Inverse relationship in money flow and interest rates. Increasing money flow
and decreasing interest rates can encourage spending and, as a result,
stimulates the economy. More spending means more jobs and curbing
unemployment.
 A central bank buys and sells government securities to bring accurate
momentum and money flow. Sometimes a central bank sets a required
reserve ratio which bound other commercial banks to keep a certain amount
of cash with them at all times.
Fiscal and Monetary Policy
Effects on Economy
 These policies have an impact on individual’s life too. If a government thinks
the economy is overheating and growing very fast, there are chances of
inflation so, the government may decrease spending.
 Decline in government spending means lowering the overall demand in the
economy results in lower production. Low production means lower hiring
and investments. So, a cut in government spending will hurt general people
as they will have less money in pockets to invest in their stores or shops and
there will be a general decline in the economy.
 Decreasing in taxes can stimulate the economy as people will have more
money in pockets to either invest or save. The investments will increase
production and more people will be hired reducing the level of
unemployment.
Conclusion
Fiscal and monetary policies are extremely vital in keeping the economy strong
and secure. Since the early nineteen hundreds, we can say the time of economic
growth dominates the time of economic crunch or recession. Due to proper
economic management and stable business cycles in the world the economies of
various nations will enhance and maintain the level of stability that is
satisfactory.
Fiscal and monetary policies can ensure the smooth running of the economy of a
country. Flexible policies that can be changed over time can make the economy
strong and stable.