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 indemnity 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 come out of economy is quite stable such that the market forces can better interact with each other to achieve the equilibrium in the economy due to the presence of automatic stabilizers in the economy.Active policy is quite famous among the policymakers due to the fact that by apply this get down the economy can be steered to a particular direction in quick times. The active policy is mainly utilized by the existing presidents just before the elections in regulate to gain about short term advantages so that their chances of being elected for the next tenure can be increased. some other important strength of this approach is that generally this approach is present ed to the public in a very decent manner by the central bank and the government, but in reality, both these institutions to a great extent 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 command 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 wipe 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 under this approach. Another important weakness