Introduction to Demand-side Policies
- Demand-side policies aim to shift aggregate demand (AD) in an economy
- There are two categories of demand-side policies
- Fiscal policy and monetary policy
- Fiscal policy and monetary policy
- Fiscal policy involves the use of government spending and taxation to influence AD
- The government is responsible for setting fiscal policy
- Governments usually present their fiscal policies to the country each year when they deliver the Government budget
- Monetary policy involves adjusting interest rates and the money supply so as to influence AD
- Central Banks are usually responsible for setting monetary policy
- Central Bank committees usually meet 4-8 times a year to set policy