Question

. Which is considered a strength of monetary policy compared to fiscal policy?

A. The ability to increase the budget deficit
B. The ability to decrease the budget surplus
C. Its protection from political pressure
D. It is sluggish

Answer 1

A strength of monetary policy compared to fiscal policy is its protection from political pressure.

Step-by-step explanation:

A strength of monetary policy compared to fiscal policy is its protection from political pressure. While fiscal policy involves government decisions regarding spending and taxation, monetary policy is typically determined by a central bank, like the Federal Reserve in the United States, which is independent from political pressures. This independence allows the central bank to make decisions based on economic factors rather than political considerations.

For example, during a recession, the central bank can implement expansionary monetary policy by reducing interest rates to stimulate economic activity. This decision can be made relatively quickly, whereas implementing fiscal policy changes, such as tax cuts or spending increases, requires the approval of the Congress and can be subject to political debates and negotiations.

Therefore, the protection from political pressure is a significant advantage of monetary policy over fiscal policy.