Fiscal and monetary policy: transmission, lags and conflicts

What this note covers

1. Demand management: two tools aimed at aggregate demand
2. Fiscal policy: the budget stance and automatic stabilisers
3. Monetary policy: the policy interest rate and its transmission
4. Time lags: why policy does not work instantly
5. Conflicts between objectives: why one policy rarely fixes everything
6. Worked example: Correnda's inflationary boom
7. How this topic is examined and what separates a top response

7 sections · 11 key terms & formulas · 6 common mistakes