Answer to Question #215174 in Finance for Precilla

Question

Question 1 (25 Marks)

1.1 Differentiate between fiscal policy and monetary policy.

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1.2 The spread of COVIC-19 across all countries of the world resulted in resorting to various forms of 

lockdown measures. The locks down measures crippled many economies including the South African 

Economy. To resuscitate these economies, there is renewed interest in fiscal policy as a tool 

macroeconomic policy. Critically discuss the shortcomings of anti-cyclical policy

Answer 1

Monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. Fiscal policy refers to the tax and spending policies of the federal government.

In total, these lockdown measures have profound economic implications.In terms of recovery, the 'Quick' recovery scenario results in a GDP decline of about 5 per cent by the end of 2020—an economic outcome that would have been considered catastrophically bad a little more than one month ago.