Fiscal Vs. Monetary Policies In Fiscal Policy it involves the government changing tax rates and levels of government spending to influence aggregate demand in the economy. In simpler words, it’s the governments way to check over the nation’s economy to see if the tax rates and the spending is appropriate. The Fiscal Policy covers the policies of all the taxes and the spending. Fiscal Policy is close with the political philosophy such as justice, politics, and liberty. Obviously, the lower the tax rates the more people are able to spend. If all goes right the unemployment would be low, there would be low inflation, and a constantly growing economy would appear.
In Monetary Policy it involves changing the interest rate and influencing the money supply. Monetary Policy is usually carried out by the Central Bank/Monetary authorities and involved setting base interest and influencing the supply of money. Similar to Fiscal Policy, Monetary Policy is run by the Central Bank that influences the money supply, which is the total money in the economy as a whole. The interest rates are based on what the economy can handle. For example, if the economy went into a recession then that would mean that the Central Bank would decrease the interest rates and vice versa. Since the Monetary Policy is run by the Central Bank, it cuts from having any political input.
The whole point is to make our economy grow but at a constant rate, and these policies are able to do that by doing their part in our nation. Without these policies, our economy would struggle to be either constant or even growing. One policy helps with the tax rates and the spending while the other helps with interest rates which affects money