Answered

Q1. Name one instrument of monetary policy and explain how the government can use it to reduce a high rate of unemployment.
(2 marks)

Q2. Name one tool of fiscal policy and explain how the government can use it to reduce inflation.
(2 marks)

Q3. What do monetary and fiscal policies ultimately influence or control?
(1 mark)



Answer :

GinnyAnswer

Final answer:

Monetary and fiscal policies can be used to address unemployment and inflation by adjusting interest rates, government spending, and money supply.


Explanation:

Monetary Policy: One instrument of monetary policy is open market operations where the central bank buys or sells government securities to influence the money supply and interest rates. By purchasing securities, the central bank injects money into the economy, lowering interest rates, leading to increased borrowing, spending, and investment, ultimately reducing unemployment rates.

Fiscal Policy: One tool of fiscal policy is government spending. In the case of combating inflation, the government can reduce its spending, which decreases the overall demand in the economy, thereby reducing inflationary pressures.

Impact of Policies: Monetary and fiscal policies influence or control key macroeconomic variables like interest rates, money supply, government spending, and taxes, affecting factors such as inflation, unemployment, and overall economic growth.


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