What is the role of monetary policy in alleviating economic downturns? Q.What is the role of monetary policy in alleviating economic downturns? A.Economists view monetary policy as the first line of defense against economic slowdowns—the Federal Reserve can act faster than the president or Congress, and it is better equipped to judge the appropriate timing and magnitude of economic stimulus. Read more about What is the role of monetary policy in alleviating economic downturns?
How do taxes affect the economy in the long run? Q.How do taxes affect the economy in the long run? A.Primarily through the supply side. High marginal tax rates can discourage work, saving, investment, and innovation, while specific tax preferences can affect the allocation of economic resources. But tax cuts can also slow long-run economic growth by increasing deficits. The long-run effects of tax policies thus depend not only on their incentive effects but also their deficit effects. Read more about How do taxes affect the economy in the long run?
What are automatic stabilizers and how do they work? Q.What are automatic stabilizers and how do they work? A.Automatic stabilizers are features of the tax and transfer systems that temper the economy when it overheats and stimulate the economy when it slumps, without direct intervention by policymakers. Read more about What are automatic stabilizers and how do they work?
