Do you believe that fiscal policy and monetary policy are wo

Do you believe that fiscal policy and monetary policy are working in congruence or are in conflict in 2014? Justify your position and limit your response to no mare than two paragraphs. .

Solution

Fiscal policy and monetary policy are working in congruence in 2014. These are macroeconomic devices for fulfilling country’s economic objectives. Fiscal policy deals with tax rate. Monetary policy deals with interest and inflation rate.

Basically high inflation is controlled if money supply is restricted. In the year 2014 inflation rate was high. Government increased income tax rate, which is a part of fiscal policy. Once the tax rate is increased, people didn’t have enough money in hand to purchase because of paying tax. It reduced inflation and increased aggregate output.