Explanation:
According to the BIS Annual Economic Report, fiscal consolidation (reducing government deficits and debt accumulation) plays a complementary role in achieving sustainable economic growth and low inflation. It supports monetary policy tightening by reducing aggregate demand in the economy, which in turn helps to contain inflationary pressures. A coordinated approach ensures that both fiscal and monetary policies pull in the same direction, avoiding a scenario where expansionary fiscal policy counteracts efforts by the central bank to control inflation.
Ultimate access to all questions.
Q.37 The BIS Annual Economic Report 2024 emphasizes the need for coordinated policy responses to achieve sustainable economic growth and low inflation. Which of the following most accurately describes the relationship between fiscal consolidation and monetary policy tightening in this context?
A
Fiscal consolidation counteracts monetary tightening.
B
Fiscal consolidation supports monetary tightening.
C
Fiscal and monetary policies have no significant interaction.
D
Fiscal consolidation is only relevant for high-debt countries.
No comments yet.