Which can be changed more quickly: Monetary policy or Fiscal policy? Briefly explain.?

Question

This is a hw question on my Macroeconomics assignment. If someone could help me out I would really appreciate it.

I always give best answer!

Answer 1

Fiscal Policy

It is well known among economists that Monetary policy acts with a lag time of about 6-9 months as companies and banks react to changes in the Federal Funds rate (in the US) or the LIBOR rate. Conversely, fiscal policy can have immediate effects: for example the US stimulus checks. Consumers were able to receive the rebate checks and spend them well before the full effects of the concurrent cuts in the Federal funds rate could take full effect.

Answer 2

Fiscal Policy.  Its a short term plan, whereas Monetary policy is long term.

Fiscal Policy = Fund the War in Iraq

Monetary Policy = Increase the Money Supply 1% per year.

Answer 3

Think about who controls monetary policy and who controls fiscal policy.  How often are policy decisions made?  How difficult is the process of approving policy change?  And how immediate are the effects of the policy change?