Question

Fiscal policy and monetary policy are two tools used by the federal government to influence the United States economy. The executive and legislative branches share the responsibility of setting fiscal policy. The Federal Reserve Board has the primary role of setting monetary policy.1. Define fiscal policy.2. Describe one significant way the executive branch influences fiscal policy.3. Describe one significant way the legislative branch influences fiscal policy.4. Define monetary policy.5. Explain two reasons why the Federal Reserve Board is given independence in establishing monetary policy.

Answer 1

1) Fiscal policy is a policy that helps the government of a nation to increase or decrease it's spending and tax rate, so as the influence the economy of the nation in a desired manner.

2) The president, which is the head of the executive branch of government is the one that approves the fiscal policy, for the Chambers to implement into law. And the president has the power to decide if to or not to approve a fiscal policy that has won the approval of the legislative body.

3) The legislative branch of government are the Senate house, house of representative, and house of assembly in the state level. This body are the ones that implement any fiscal policy that was approved by the Executive. If a president approves a tax cut for it's citizens, the legislative body have to implement the law, before it becomes effective in the country.

4) Monetary policy is the policy used by the monetary authority of a country which helps to controls the circulation of money in the country, by monitoring the interest rate payable on very short-term borrowing and the money supply, which its main target is inflation and interest rate to ensure price stability and general trust in the currency.

5) I) To avoid political influence in the boards decision. Because the legislative and executive arm of government are mostly political in their decisions. If allowed to participate in the decisions of the monetary policy there will involve their political fight, which are sometimes seen in the fiscal policies decision, into the monetary policy.

II) To make it decision process faster, as the monetary policy always needs an urgent attention, as it helps to keep the nation's economy stable. It will be difficult to achieve a fast decision if any other arm is involved in the monetary policy.

Answer 2

Fiscal policy refers to the measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocation of taxes and government expenditures. Fiscal policy relates to the decisions which determine whether a government will spend more or less than it receives.

Fiscal policies are influenced by the executive and legislative branch of a country.

Step-by-step explanation:

One of the ways the executive branch influences fiscal policy is that the President and the Secretary of the Treasury directs the fiscal policies of the United States. Since the fiscal policy is tied into each year's federal budgets, the President proposed this budgets to be approved by the Congress.

One of the ways the Legislative branch influence fiscal policy is that the approve the Federal budget proposed by the President. In United States, Congress passes laws and appropriates spending for any fiscal policy measures. This process involves participation, deliberation and approval from both the House of Representatives and the Senate.

Monetary policy refers to the policy undertaken by the monetary authority of a country to control money supply in order to achieve macroeconomics goals which in turn promote sustainable economic growth. Monetary policy reduces liquidity to prevent inflation.

Reasons why the Federal Reserve Board is given independence in establishing monetary policy are

1. They are free from short term legislative/executive pressures. Without the degree of autonomy, the Federal Reserve Board could be influenced by election focused politicians into enacting an excessively expansionary monetary policy to lower unemployment in the short term. Tho could lead high inflation.

2. They Federal Reserve Board runs a technocrat appointment rather than a political appointment. The monetary decision of the Federal Reserve Board is not ractified by the President. They receive no funding by the Congress and members of the Board of governors who are appointed, serve 14-year term. This terms do not coincide with presidential terms, thus making them further independence.