Chapter 17.3, Problem 3R

To determine

To evaluate the major difference between fiscal policy and monetary policy.

Explanation of Solution

Monetary policy and fiscal policy refer specifically to the two most commonly known instruments used to regulate the economic activity of a country. Monetary policy is mainly concerned with interest rate management and total circulating money supply, and is usually performed by central banks, such as the US. Federal Reserve.Central banks have typically used monetary policy either to stimulate an economy, or to control its expansion.

Fiscal policy reflects a common concept for government expenditure and taxation acts. In the United States the government's legislative and executive branches establish the national monetary policy.

Generally speaking, most fiscal policies of the government aim to identify the maximum level of expenditure, the all total composition of expenditure, or both in an economy. reforms in government spending policies or government tax policies are the two most commonly used ways of influencing fiscal policy.

Economics Concept Introduction

Introduction:Fiscal policy is the way a government changes its government spending and taxation in order to control and control the economy of a country. It is the sister monetary policy tool, in which a central bank controls the money supply of a country.