Editing Fiscal policy (section)

== Monetary or fiscal policy? ==
{{main|Monetary/fiscal debate}}

Since the 1970s, it became clear that monetary policy performance has some benefits over fiscal policy due to the fact that it reduces political influence, as it is set by the central bank (to have an expanding economy before the general election, politicians might cut the interest rates). Additionally, fiscal policy can potentially have more supply-side effects on the economy: to reduce inflation, the measures of increasing taxes and lowering spending would not be preferred, so the government might be reluctant to use these. Monetary policy is generally quicker to implement as interest rates can be set every month, while the decision to increase government spending might take time to figure out which area the money should be spent on.<ref name="Pettinger" />

The recession of the 2000s decade shows that monetary policy also has certain limitations. A [[liquidity trap]] occurs when interest rate cuts are insufficient as a demand booster as banks do not want to lend and the consumers are reluctant to increase spending due to negative expectations for the economy. Government spending is responsible for creating the demand in the economy and can provide a kick-start to get the economy out of the recession. When a deep recession takes place, it is not sufficient to rely just on monetary policy to restore the economic equilibrium.<ref name="Pettinger">{{cite web |last1=Pettinger |first1=Tejvan |title=Difference between monetary and fiscal policy |url=https://www.economicshelp.org/blog/1850/economics/difference-between-monetary-and-fiscal-policy/ |website=Economics.Help.org |publisher=Economics.Help.org |access-date=April 26, 2019}}</ref>
Each side of these two policies has its differences, therefore, combining aspects of both policies to deal with economic problems has become a solution that is now used by the US. These policies have limited effects; however, fiscal policy seems to have a greater effect over the long-run period, while monetary policy tends to have a short-run success.<ref name="Schmidt">{{cite web |last1=Schmidt |first1=Michael |title=A Look at Fiscal and Monetary Policy |url=https://www.investopedia.com/articles/economics/12/fiscal-or-monetary-policy.asp |website=Invetopedia |publisher=Dotdash |access-date=April 26, 2019}}</ref>

In 2000, a survey of 298 members of the [[American Economic Association]] (AEA) found that while 84 percent generally agreed with the statement "Fiscal policy has a [[Stimulus (economics)|significant stimulative impact]] on a less than [[Full employment|fully employed]] economy", 71 percent also generally agreed with the statement "[[Procyclical and countercyclical variables#Economic policy making|Management]] of the [[business cycle]] should be left to the [[Federal Reserve]]; [[Discretionary policy|activist fiscal policy]] should be avoided."<ref name="Fuller & Geide-Stevenson 2003">{{cite journal|last1=Fuller|first1=Dan|last2=Geide-Stevenson|first2=Doris|title=Consensus Among Economists: Revisited|date=Fall 2003|journal=[[Journal of Economic Education|The Journal of Economic Education]]|volume=34|issue=4|pages=369–387|jstor=30042564|doi=10.1080/00220480309595230|s2cid=143617926 }}</ref> In 2011, a follow-up survey of 568 AEA members found that the previous consensus about the latter proposition had dissolved and was by then roughly evenly disputed.<ref name="Fuller & Geide-Stevenson 2011">{{cite journal|last1=Fuller|first1=Dan|last2=Geide-Stevenson|first2=Doris|title=Consensus Among Economists – An Update|year=2014|journal=[[Journal of Economic Education|The Journal of Economic Education]]|publisher=[[Taylor & Francis]]|volume=45|issue=2|pages=131–146|doi=10.1080/00220485.2014.889963|s2cid=143794347 |url=https://www.researchgate.net/publication/261884738}}</ref>