Identify five to ten policies the government uses to stabilize the economy and summarize the arguments for and against using fiscal and monetary policies to stabilize the economy.

Some of the policies used by the government to stabilize the economy are:

• Increasing or decreasing the level of government spending to bring changes in the aggregate demand in the economy.
• Bringing changes in the interest rate to change the money supply in the economy.
• Buying or selling of government treasuries in open market.
• Imposing trade restrictions to stabilize the domestic economy.
• Changing the rate of tax according to the condition of the economy.

Advantages of using fiscal and monetary policies:

Using fiscal and monetary policies help to stabilize the economy with certain controlling measures along with public welfare. The stability in the economy is achieved both in the long run and short run. The problem of overheating in the economy is also solved by using fiscal and monetary policies.

Disadvantages of using fiscal and monetary policies:

It restricts the level of competition in the economy as there is increase in the government intervention in the market. These policies also take time to work.