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15 April, 05:19

The Federal Reserve is worried about rising prices, so it has decided to decrease the money supply. The government

wants to encourage economic growth, so it has decided to cut taxes. This situation shows that the Federal Reserve and

the government can have_ goals.

the same

conflicting (or different)

+3
Answers (1)
  1. 15 April, 06:44
    0
    conflicting

    Explanation:

    The money supply in an economy usually affects the price of goods and economic growth thus they need to be constantly checked and controlled to ensure that the price is manageable and the economy is also growing at a reasonable rate. Different policies can be put in place to control the money supply. There are two major types of policies that can be utilized, namely; contractionary and expansionary policies. Contractionary policy tends to reduce the money supply in the economy. In an economy where there is a huge supply of money in the economy, people tend to spend more thus increasing demand for goods and services. This increased demand causes the price to rise, causing inflation. On the other hand, expansionary policy is used to increase the money supply in an economy When the money supply in the economy is low, there is less spending thus the economy growth is greatly reduced.

    In our case, the decision by the Federal Reserve to decrease money supply in order to reduce rising prices is a type of contractionary policy, while the decision by the government to cut taxes to encourage economic growth is a type of expansionary policy. These tend to have conflicting goals since one aims at decreasing money supply while the other aims at increasing money supply.
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