Do you think monetary or fiscal policy has been more effective in practice in stabilizing the business cycle?

Question

Why?

Answer 1

Both have their advantages.

Fiscal policy is more potent but slower to enact. An increase in spending has a multiplier effect, and fiscal policy can be targeted at those most in need of help -- the unemployed. However, fiscal policy is also slow to act -- you need to get 100s of people in a room and agree on a new policy.

Monetary policy is not as effective, but can be changed overnight. It is a blunt instrument, because interest rate changes have different effects across the economy, and not always effective. But, the central bank can change policy very quickly.

Answer 2

Both have helped the economy to stabilize and have shorter and less traumatic recessions and longer periods of expansion. To say one is better than another is almost idiotic. Both have their reason for being, but it is usually better to use monetary policy to control the economy because it is easier to implement.

Answer 3

Fiscal policy tempers is better, because it does not directly effect the production of money, it affects the demand for moeny.

Monetary policy is hardcore.