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The Reserve Bank controls money supply by affecting the level of reserve assets held by financial institutions. This is done by trading assets in government securities. As the effect of change in money supply on aggregate demand is indirect, it is argued that monetary policy is less effective than fiscal policy in stabilizing the economy. Fiscal policy is also aimed at influencing a nation’s aggregate demand and includes measures undertaken by the government in relation to raising revenue through taxation. Fiscal policy is concerned with achieving the short-run objectives of full employment or price stability and is implemented through the Federal Government’s yearly budget...
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