Question

Significance of monetary and fiscal policy in present economy

Answer 1

Fiscal policy is when our government uses its spending and taxing powers to have an impact on the economy. ... The direct and indirect effects of fiscal policy can influence personal spending, capital expenditure, exchange rates, deficit levels and even interest rates, which are usually associated with monetary policy.

Answer 2

, this increases our income and our demand for imports, and ultimately lowers the exchange rate. Contractionary policies have the opposite effect. ... This leads to higher prices domestically and relatively cheaper imports.