SPXT - Inflation: Monetary And Fiscal Policy

• Monetary and fiscal policy respond to economic conditions, with the appropriate response dependent on the balance of supply and demand in goods and services markets and capital markets.
• Monetary policy can try to stimulate activity in goods and services markets by lowering the cost of capital, but this is ineffective when sentiment is negative.
• Fiscal policy can directly stimulate activity in goods and services markets, but this can cause inflation and the distortion of markets.
• Monetary policy is unlikely to cause inflation while demand for debt remains low, but a change in fiscal policy could put an end to low interest rates.

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