Respuesta :
Fiscal and monetary policies both aim to influence aggregate demand in the near run. They vary in that monetary policy is carried out using the money supply, whereas fiscal policy is carried out using the government's budget.
The entire total spending on domestic goods and services in an economy is known as aggregate demand.
A policy lag is the period of time it takes for economic choices to be implemented. In that, they take longer to implement, and fiscal policies have larger delays than monetary ones.
In order to pursue the best long-term policies for the economy, active policy depends on the judgment and moral integrity of decision-makers. The ability to make decisions is taken away from policymakers by passive policy, which instead depends on the wisdom and morality of the people who created the laws.
Three main lags implementation for the debate over active versus passive policy:
- Response lag is the interval between the adoption of a policy and the observation of its economic effects.
- The amount of time needed to acknowledge that there is an issue with the economy that has to be fixed.
- Decision lag is the amount of time it takes to decide on a course of action in response to a financial issue.
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