Economía: Política Fiscal y Monetaria

Study Notes

Government expenditures on goods and services, infrastructure, and transfer payments (e.g., social security benefits)
Can be used to:
- Stimulate economic growth during recessions
- Provide public goods and services
- Redistribute income

Government revenue collection through taxes on income, consumption, and wealth
Can be used to:
- Redistribute income and reduce inequality
- Influence consumer behavior (e.g., sin taxes on tobacco and alcohol)
- Finance government expenditures

Central bank sets an inflation target (e.g., 2% annual inflation rate) and uses monetary policy to achieve it
Benefits:
- Anchors inflation expectations
- Reduces uncertainty and volatility
- Promotes economic stability

Tools used by central banks to implement monetary policy:
1. Open Market Operations: buying or selling government securities to increase or decrease money supply
2. Reserve Requirements: setting minimum reserve requirements for commercial banks to influence lending
3. Interest Rates: setting interest rates to influence borrowing and spending
4. Forward Guidance: communicating future monetary policy intentions to influence market expectations

Goals of fiscal policy:
1. Economic Growth: promoting economic expansion and job creation
2. Price Stability: maintaining low and stable inflation
3. Full Employment: achieving a high level of employment
4. Redistribution of Income: reducing income inequality through progressive taxation and social welfare programs