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The Roles Of Fiscal And Monetary Policy Assignment Summary Do My History Assignment

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How to Induce investment and capital formation ap us history essay help: ap us history essay help

Induce investment and capital formation

Fiscal policy is applied to encourage investment in strategic sectors and public-utility facilities, and private-sector investment by assisting new industries and introducing advanced manufacturing techniques. Eventually, investments in social and economic overheads aid in raising social marginal productivity hence private investment and capital formation marginal productivity.

Provide more employment opportunities

Fiscal policy stimulates huge spending which will increase employment opportunities thus taking care of the rapid population growth.

Promotion of economic stability

Fiscal policy plays a role in preserving reasonable internal and external economic stability. A developing country is generally vulnerable to the effects of foreign cyclical fluctuations.

Promotion of economic stability assignment summary history assignment help

Promotion of economic stability

Fiscal policy plays a role in preserving reasonable internal and external economic stability. A developing country is generally vulnerable to the effects of foreign cyclical fluctuations. These countries primarily export raw materials and import manufactured and capital goods. However, in order to minimize the effects of international cyclical fluctuations, fiscal policy must aim at the diversification of all sectors of the economy.

Reallocation of resources

Resource allocation is inefficient in developing nations since private sector’s resources are invested in manufacture of products that cater to the needs of the wealthier segments of society while also yielding higher profits. Fiscal instruments such as tax incentive measures and government subsidy programs divert resources from less useful output to more useful networks.

Fiscal policy also reduces income and wealth inequality by redirecting misallocated capital into effective channels for economic growth.

 

The roles of monetary policy in an economy summary us history essay help: us history essay help

The roles of monetary policy in an economy

Achieve Price Stability

Monetary policy maintains market stability by ensuring balanced demand for and supply of money such that less money supply will reduce productivity, while an excess may lead to inflation. The gradual monetization of the non-monetized market, as well as increased agricultural and industrial production, increase the demand for money as the economy grows.

Bridge Balance of Payments Deficit

Interest rate policy, bridges the balance of payments deficit through import of capital equipment, machinery, raw materials, spares, and components to build infrastructure such as electricity, irrigation, transportation, and directly productive activities such as iron and steel, chemicals, electrical, fertilizers, and so on to meet their development goals.

Interest rate policy

It encourages the use of scarce capital resources to invest in more profitable networks since high interest rates deter investment hence a low interest rate policy. However, empirical evidence indicates that in underdeveloped countries, investment in business and industry is interest-inelastic because interest accounts for a small portion of overall investment costs.

Create banking and financial institutions

Monetary policy establishes and grows banking and financial institutions in order to promote, mobilize, and channel savings for capital formation. Branch banking is encouraged in both rural and urban areas to aid in the monetization of the non-­monetized sector while also encouraging saving and capital formation. It is also responsible for organizing and developing money and capital markets. These are essential for a development-oriented monetary policy to succeed, as well as debt management.

Bridge Balance of Payments Deficit sampled summary history assignment writing help

Bridge Balance of Payments Deficit

Interest rate policy, bridges the balance of payments deficit through import of capital equipment, machinery, raw materials, spares, and components to build infrastructure such as electricity, irrigation, transportation, and directly productive activities such as iron and steel, chemicals, electrical, fertilizers, and so on to meet their development goals.

Interest rate policy

It encourages the use of scarce capital resources to invest in more profitable networks since high interest rates deter investment hence a low interest rate policy. However, empirical evidence indicates that in underdeveloped countries, investment in business and industry is interest-inelastic because interest accounts for a small portion of overall investment costs.