Answer to Question #215029 in Macroeconomics for Lwely

Question

1.1 Differentiate between fiscal policy and monetary policy. (5)
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

Fiscal policy refers to the tax and spending policies of the federal government. In contrast, monetary policy refers to actions taken by the federal banks to achieve macro-economic policy objectives such as price stability.

The anti-cyclical policy will lower the interest rates to increase the money supply to the economy. This will lead to unemployment because companies will try to reduce costs incurred by laying off workers.