"Why do the central bank control monetary policy, but the government control fiscal policy?"

As of 1997, monetary policy has been independent from the government in order to remove any political bias or influence from the decision making. The government often had the habit of reducing interest rates prior to elections in order to boost spending and consumer confidence, thereby winning votes, and then raising interest rates once elected. This is unsustainable and can lead to excess inflation and instability, and hence the setting of interest rates was made independent.
Furthermore, this essentially reduces the scope and extent of government intervention in the economy, allowing the government to use its time and resources more effectively on fiscal policy.

TD
Answered by Tutor114968 D. Economics tutor

1933 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What is the difference between perfect competition and imperfect competition?


Explain what you understand by the Lorenz Curve and Gini Coefficient.


Does a higher NMW increase the distribution of income?


Explain what is meant by the rate of inflation and  analyse the main causes of inflation


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences