Question

Which of the following economic policies by governments help maintain full employment and reasonable price stability in an economy?

• A. Monetary policy
• B. Fiscal policy
• C. Stabilization policies
• D. Both (b) and (c)

Answer 1

The correct option is D Both (b) and (c)

Fiscal policy is the taxing (revenue collection) and spending (expenditures) policies of the federal government. The goals of fiscal policy are to to promote price stability, full employment, and economic growth. ... The federal budget is the basic tool for making fiscal policy. Full employment and price stabilisation are also the incompatible objectives of monetary policy, since there is a trade-off between the rate of unemployment and the rate of inflation. To curb inflation, a contractionary monetary policy is needed. But, this has an adverse effect on the level of employment.