Page 128 Volume 3, in the answer for Q 16, under Government Spending relative to Tax receipts, it is written that bond yields could increase because of higher aggregate growth and because of the potential higher inflation that ****“Monetary”**** ( emphasis mine) stimulation can cause over time . Shouldn’t it be fiscal stimulation , not monetary stimulation ? Central bank causes monetary stimulation by printing currency, Government causes fiscal stimulation by running deficits , yes?
I think you are correct. Government spending is definitely an example of fiscal stimulation whereas Fed actions would be monetary stimulations.
janakisri Wrote: ------------------------------------------------------- > Page 128 Volume 3, in the answer for Q 16, under > Government Spending relative to Tax receipts, it > is written that bond yields could increase because > of higher aggregate growth and because of the > potential higher inflation that ****“Monetary”**** > ( emphasis mine) stimulation can cause over time > . > > Shouldn’t it be fiscal stimulation , not monetary > stimulation ? > > Central bank causes monetary stimulation by > printing currency, Government causes fiscal > stimulation by running deficits , yes? But isn’t higher inflation caused by monetary simulation instead of fiscal?
Maybe so , but Government Spending isn’t monetary stimulation . Lowering discount rates or printing more currency is monetary stimulation performed by Central Banks , not Governments , at least where there is independence between the two