U.S. Federal Reserve or European Central Bank), Interest rates; reserve requirements; currency peg; discount window; quantitative easing; open market operations; signalling. Fiscal policy can lead to increased employment and income, through policies like government expanding or tax cuts for lower-in… Monetary policy addresses interest rates and the supply of money in circulation… The legislative and executive branches of government control fiscal policy. A policy mix is a combination of the fiscal and monetary policy developed by a country's policymakers to develop its economy. Monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. Fiscal policy is the use of government expenditure and revenue collection to influence the economy. U.S. Congress, Treasury Secretary), Central Bank (e.g. Monetary policy is the domain of the central bank. (The macroeconomy can be usefully split into aggregate supply, and aggregate demand.) In other words, fiscally accommodative central bankers are adaptively successful in the political environment of fiscal–monetary decision making. < >. Fiscal Policy gives direction to the economy. The Fed also can target changes in the discount rate (the interest rate it charges on loans it makes to financial institutions), which is intended to impact short-term interest rates across the entire economy. For this reason, fiscal policy often is hotly debated among economists and political observers. Companies also benefit as they see increased revenues. The following illustration of the above comparison chart will give you a clear picture of the differences between the two: 1. On the other hand, the monetary policy is announced by the central bank. To learn about the different monetary and fiscal policy tools, watch the video below. For example: Both tools affect the fiscal position of the government i.e. Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest to attain a set of objectives oriented towards the growth and stability of the economy. This is referred to as deficit spending. Monetary policy has become the major form of discretionary contracyclical policy used by the federal government. C) the success of monetary policy in helping the economy emerge from the 1990-1991 recession and sustain economic growth through the 1990s One of the strengths of monetary policy relative to fiscal policy is that monetary policy: Monetary policy, because Monetary policy is set by the Central Bank, and therefore reduces political influence (e.g. Its actions prevented deflation and economic collapse but did not generate significant economic growth to reverse the lost output and jobs. Meanwhile, fiscal policy often has less efficient influence on economic trends. Quantitative easing (QE) refers to emergency monetary policy tools used by central banks to spur iconic activity by buying a wider range of assets in the market. Fiscal policy is how the government influence the economy through spending and taxation. Fiscal Policy is carried out by the Ministry of Finance whereas the Monetary Policy is administered by the Central Bank of the country. For a more in-depth technical discussion watch this video, which explains the effects of fiscal and monetary policy measures using the IS/LM model. By incentivizing individuals and businesses to borrow and spend, the monetary policy aims to spur economic activity. politicians may cut interest rates in desire to have a booming economy before a general election) Monetary policy is primarily concerned with the management of interest rates and the total supply of money in circulation and is generally carried out by central banks, such as the U.S. Federal Reserve. Fiscal policy is a collective term for the taxing and spending actions of governments. A source of conflict is that the Fed is independent and is not under the direct control of either the President or the Congress. Federal Reserve. Both monetary and fiscal policy, in macroeconomics, are methods of managing aggregate demand. Both fiscal policy and monetary policy can impact aggregate demand because they can influence the factors used to calculate it: consumer spending on … Accessed Oct. 1, 2019. The Fed chairman is appointed by the government and there is an oversight committee in Congress for the Fed. If a government believes there is not enough business activity in an economy, it can increase the amount of money it spends, often referred to as stimulus spending. Both the policies can be expansionary or contractionary. Changes in reserve requirements, open market operations, selective credit controls, and bank rate variation policies are all monetary policies. Both fiscal and monetary policy can be either expansionary or contractionary. Fiscal policy or Monetary Policy? A source of conflict is that the Fed is independent and is not under the direct control of either the President or the Congress. In the United States, this is referred to as the federal funds rate or fed funds for short. But the organization is largely independent and is free to take any measures to meet its dual mandate: stable prices and low unemployment. Manipulating the level of aggregate demand in the economy to achieve economic objectives of price stability, full employment, and economic growth. These methods are applicable in a market economy, but not in a fascist, communist or socialist economy. In Monetary Policy, central banks try to control the money supply and credit availability through various tools. Fiscal policy uses government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, and inflation. Manipulating the supply of money to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Monetary Policy Similarly to the fiscal tools, monetary policies generally aim to either stimulate economic growth or slow down expansion to keep inflation at a “comfortable” level. Both monetary and fiscal policy are macroeconomic tools used to manage or stimulate the economy. Both fiscal policy and monetary policy can affect consumers. The sensitivity of investment demand and net exports […] In doing so, government fiscal policy can target specific communities, industries, investments, or commodities to either favor or discourage production—sometimes, its actions are based on considerations that are not entirely economic. Monetary policy seeks to spark economic activity, while fiscal policy seeks to address either total spending, the total composition of spending, or both. Monetary policy relates to the supply of money, which is controlled via factors such as interest rates and reserve requirements (CRR) for banks. Both monetary and fiscal policy are macroeconomic tools used to manage or stimulate the economy. The two most widely used means of affecting fiscal policy are changes in government spending policies or in government tax policies. In this article, we will take a look at the combined effects of monetary and fiscal policy on the economy in different scenarios: First, they both represent a nation’s policies to regulate its economy. On the other hand, Monetary Policy brings price stability. ADVERTISEMENTS: The upcoming discussion will update you about the difference between monetary and fiscal policy. Federal Reserve. Monetary policy is more of a blunt tool in terms of expanding and contracting the money supply to influence inflation and growth and it has less impact on the real economy. Unlike monetary policy that changes the money supply and influences the spending decisions, government alters its own purchases of goods and services in the fiscal policy; thus, fiscal policy shifts the aggregate-demand curve directly. Central banks typically have used monetary policy to either stimulate an economy or to check its growth. Decisions about taxation and spending is a tool used in fiscal policy through government policies. 1. Edit or create new comparisons in your area of expertise. This led to the housing bubble and the subsequent financial crisis in 2008. the budget deficit goes up whether the government increases spending or lowers taxes. Economists and politicians rarely agree on the best policy tools even if they agree on the desired outcome. John Maynard Keynes was a key proponent of government action or intervention using these policy tools to stimulate an economy during a recession. These include white papers, government data, original reporting, and interviews with industry experts. Policy measures taken to increase GDP and economic growth are called expansionary. Contrary to this, the monetary policy maintains and regulates the money supply within the economy. In September 2016, The Economist made a case for shifting reliance from monetary to fiscal policy given the low interest rate environment in the developed world: Libertarian economists believe that government action leads to inefficient outcomes for the economy because the government ends up picking winners and losers, whether intentionally or through unintended consequences. Difference between Monetary Policy vs Fiscal Policy Monetary policies are announced by the monetary authority. It might lower taxes or offer tax rebates in an effort to encourage economic growth. Monetary policy and fiscal policy together have great influence over a nation's economy, its businesses, and its consumers. Monetary policy is the domain of the central bank. A public-finance approach yields several insights. In many developed Western countries — including the U.S. and UK — central banks are independent from (albeit with some oversight from) the government. For example, after the 9/11 attacks the Federal Reserve cut interest rates and kept them artificially low for too long. Unlike monetary policy, fiscal policy has one goal, which is to influence ‘healthy’ economic growth – which isn’t a set target and is more of a Goldilocks’, and the bears approach, not too fast and not too slow. The short answer is that Congress and the administration conduct fiscal policy, while the Fed conducts monetary policy. Both fiscal and monetary policy play a large role in managing the economy and both have direct and indirect impacts on personal and household finances. Fiscal policy and monetary policy are importantly different in that they affect interest rates in opposite ways. As noted in the excerpt above, one criticism of fiscal policy is that politicians find it hard to reverse course when the policy measures, e.g. In addition, the study argued that monetary policy is more effective than fiscal policy in Pakistan. Typically, fiscal policy is used when the government seeks to stimulate the economy. Investopedia uses cookies to provide you with a great user experience. 9. Learning the difference between fiscal policy and monetary policy is essential to understanding who does what when it comes to the federal government and the Federal Reserve. In the United States, the national fiscal policy is determined by the executive and legislative branches of the government. Essay Topic: Compare and contrast Fiscal Policy and Monetary Policy. Fiscal policy and monetary policy are similar in two aspects. Fiscal Policy is made for a short duration, normally one year, while the Monetary Policy lasts longer. Accessed Oct. 1, 2019. The fiscal policy ensures that the economy develops and grows through the government’s revenue collections and government’s appropriate expenditure. In an article for VOX on the tax cuts vs. stimulus debate, Jeffrey Frankel, Economics professor at Harvard University has said that sensible fiscal policy is countercyclical. Diffen.com. Fiscal policy and monetary policy are the two tools used by the state to achieve its macroeconomic objectives. The Federal Reserve, also known as the "Fed," frequently has used three different policy tools to influence the economy: open market operations, changing reserve requirements for banks and setting the discount rate. Monetary Policy: Fiscal Policy: Monetary Policy refers to the tools usually used by the Central Bank to regulate the money supply in the economy: Fiscal Policy refers to the tools used by the Fiscal Policy refers to the policy of government in which it utilizes its tax revenue and expenditure to influence the aggregate demand and supply for products and services in a country. Among the most important is the recognition that fiscal and monetary policies are linked through the government sector’s budget constraint. Fiscal policy is managed by the government, both at the state and federal levels. By using Investopedia, you accept our, Investopedia requires writers to use primary sources to support their work. Influencing economic outcomes via fiscal policy is one of the core tenets of Keynesian economics. By increasing taxes, governments pull money out of the economy and slow business activity. "Open Market Evaluations." While for many countries the main objective of fiscal policy is to increase the aggregate output of the economy, the main objective of the monetary policies is to … The fiscal policy is the record of the revenue generated through taxes and its division for the different public expenditures. Diffen LLC, n.d. Monetary policy, by construction, lowers interest rates when it seeks to stimulate the economy and raises them when it seeks to cool the economy down. Just like monetary policy, fiscal policy can be used to influence both expansion and contraction of GDP as a measure of economic growth. learned about monetary and fiscal policy to examine quotes from news sources and determine whether the quotes are about fiscal policy, monetary policy or both policies. For example, to control high inflation, policy-makers (usually an independent central bank) can raise interest rates thereby reducing money supply. Monetary policy addresses interest rates and the supply of money in circulation, and it is generally managed by a central bank. While for many countries the main objective of fiscal policy is to increase the aggregate output of the economy, the main objective of the monetary policies is to … • Fiscal policies are annual in nature, whereas monetary policies are ad-hoc in nature and depend upon economic situation in the country. Monetary policy and fiscal policy refer to the two most widely recognized tools used to influence a nation's economic activity. Learning the difference between fiscal policy and monetary policy is essential to understanding who does what when it comes to the federal government and the Federal Reserve. Fiscal policy refers to the tax and spending policies of the federal government. It can boost the export levels for the national economy. The political process can select for monetary policy makers who will accommodate fiscal needs, even without overt coordination between fiscal and monetary agents. Conversely, by restricting spending and incentivizing savings, monetary policy can act as a brake on inflation and other issues associated with an overheated economy. If there are not enough tax receipts to pay for the spending increases, governments borrow money by issuing debt securities such as government bonds and, in the process, accumulate debt. Intermediate targets are set by the Federal Reserve as part of its monetary policy to indirectly control economic performance. 10. Fiscal Policy: taxation, spending, and budgeting; Monetary Policy: money supply and interest rates; Together, fiscal and monetary policies help the government to monitor and adapt the nation’s economy and money supply. This deficit is financed by debt; the government borrows money to cover the shortfall in its budget. 2. For this reason, the main treatment of fiscal policy in connection with the effects of the deficit and the build up of the public debt on the prospects for long-run growth. In September 2016, The Economist made a case for shifting reliance from monetary to fiscal policy given the low interest rate environment in the developed world: Expansionary monetary policy can have limited effects on growth by increasing asset prices and lowering the costs of borrowing, making companies more profitable. Web. The offers that appear in this table are from partnerships from which Investopedia receives compensation. First, they both represent a nation’s policies to regulate its economy. In many developed Western countries — including the U.S. and UK — central banks are independent from (albeit with some oversight from) the government. For the same reason, has been devoted to monetary policy and some of the new problems that have emerged in conducting it. Generally speaking, the aim of most government fiscal policies is to target the total level of spending, the total composition of spending, or both in an economy. 3. Fiscal policy is implemented by the government and the monetary policy is decided by the central bank of the country. In other words, fiscally accommodative central bankers are adaptively successful in the political environment of fiscal–monetary decision making. Monetary policy often impacts the economy broadly. Central banks can use the monetary policy to weaken the … The stabilization aspects of fiscal policy. Examples of monetary policy tools include: For a general overview, see this Khan Academy video. 1. Fiscal policy and monetary policy are similar in two aspects. Two important issues must be faced in deter­mining the relative effectiveness of monetary and fiscal policies: ADVERTISEMENTS: 1. lower taxes or higher spending, are no longer necessary for the economy. The primary tool central banks use to enact monetary policy is short-term interest rates. 1.1 Introduction. "Monetary Policy." For example, the Fed was aggressive during the Great Depression. Monetary policy is typically implemented by a central bank, while fiscal policy decisions are set by the national government. between monetary policy, fiscal policy and economic growth in case of Pakistan. It is _____ to time fiscal policy compared to monetary policy because _____. A. easier; fiscal policy can be implemented quickly B. easier; monetary policy requires full Congressional approval C. harder; people can't change their spending habits quickly D. harder; fiscal policy takes longer to implement Fiscal policies are announced by the ministry of finance. • Monetary policy pertains to efforts taken buy central bank to give an impetus to the economy. However, both monetary and fiscal policy may be used to influence the performance of the economy in the short run. Monetary policy is controlled by the Central Bank. The most significant difference between the two is that monetary policy is introduced as a corrective measure by the central bank to control inflation or recession and strengthen the Gross Domestic Product (GDP). Chapter 1 Monetary and Fiscal Policy. Monetary Policy vs. Fiscal Policy: An Overview. When the … Or it can lower taxes to increase disposable income for people as well as corporations. Fiscal policy is managed by the government, both at the state and federal levels. The goal of monetary policy is to influence the macroeconomy more than to make it possible for specific people to come into power. Like monetary policy, fiscal policy alone can’t control the direction of an economy. For example, when demand is low in the economy, the government can step in and increase its spending to stimulate demand. Both monetary policy and fiscal policy go hand in hand when it comes to the economic stability and growth of a nation. Monetary policy refers to the actions undertaken by a nation's central bank to control money supply and achieve sustainable economic growth. Monetary and fiscal policies differ in how effective they are in shifting aggregate demand. Within the Federal Reserve, monetary policy is set by the Federal Open Market Committee, which meets eight times a year to assess fiscal policies. Measures taken to rein in an "overheated" economy (usually when inflation is too high) are called contractionary measures. Fiscal policy relates to government spending and revenue collection. Republicans wanted to lower taxes but not increase government spending while Democrats wanted to use both policy measures. 5. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. The short answer is that Congress and the administration conduct fiscal policy, while the Fed conducts monetary policy. Modern Monetary Theory (MMT) is a macroeconomic theory that says taxes and government spending are changes to the money supply, not entries in a checkbook. This independence of monetary policy is considered to be an important advantage compared to fiscal policy. Fiscal Policy vs. Monetary Policy Fiscal policy refers to the actions of a government—not a central bank—as related to taxation and spending. However, both monetary and fiscal policy can stimulate or decrease economic growth, by implementing policies that either tend to increase or decrease spending in the economy. Monetary policy is set by the central bank and can boost consumer spending through lower interest rates that make borrowing cheaper on everything from credit cards to mortgages. Fiscal stimulus is the increase in government spending or transfers to stimulate economic growth. You can learn more about the standards we follow in producing accurate, unbiased content in our. The primary difference between fiscal policy and monetary policy is that the former revolves around government expenditures or stimulus and taxation policies while the latter centers around the mediating roles of the central bank to control the money supply and interest rates. This inflation eats away at the margins of certain corporations in competitive industries that may not be able to easily pass on costs to customers; it also eats away at the funds of people on a fixed income. The fiscal policy is administered and announced by the Ministry of Finance. The monetary and fiscal policies are the essential financial tools used for economic growth and development of a nation. --How does each policy handle the two major macroeconomic failures of unemployment and inflation? (The macroeconomy can be usefully split into aggregate supply, and aggregate demand.) In the U.S., this is the Federal Reserve. This independence of monetary policy is considered to be an important advantage compared to fiscal policy. Open market operations are carried out on a daily basis when the Fed buys and sells U.S. government bonds to either inject money into the economy or pull money out of circulation. By setting the reserve ratio, or the percentage of deposits that banks are required to keep in reserve, the Fed directly influences the amount of money created when banks make loans. Hussain and Siddiqi (2012) test the fundamental relationship between fiscal, monetary policies and institutions in Pakistan. Monetary policy has become the major form of discretionary contracyclical policy used by the federal government. Fiscal policy refers to the government's choices regarding the overall level of government purchases or taxes. Options A and C are incorrect. When a government spends money or changes tax policy, it must choose where to spend or what to tax. Fiscal policy and monetary policy are the two tools used by the state to achieve its macroeconomic objectives. Videos Comparing Fiscal and Monetary Policy, Fiscal Policy vs Monetary Policy - Dr. F. Steb Hipple, East Tennessee State University, How to live in a low-interest-rate world -. For example, after the 2008 recession, Republicans and Democrats in Congress had different prescriptions for stimulating the economy. Distribute a copy of Handout 12: Group Venn Diagram Worksheet to each group. The political process can select for monetary policy makers who will accommodate fiscal needs, even without overt coordination between fiscal and monetary agents. Economic policy-makers are said to have two kinds of tools to influence a country's economy: fiscal and monetary. Inform them that each group will need to select a Record Keeper that will enter the group’s Both monetary and fiscal policy, in macroeconomics, are methods of managing aggregate demand. Economy in the political environment of fiscal–monetary decision making state and federal levels not in a,... Represent a nation 's economy, but not in a fascist, communist socialist! Depend upon economic situation in the short run or socialist economy on the other hand, monetary can! Fiscally accommodative central bankers are adaptively successful in the United States, this is referred as! And lowering the costs of borrowing, making companies more profitable ( 2012 ) test fundamental... By which a government spends money or changes tax policy, because monetary policy can limited... The Ministry of Finance whereas the monetary policy is implemented by a central bank (.. In and increase its spending to stimulate the economy is near full capacity, expansionary fiscal policy vs monetary.! The money supply overheated '' economy ( usually an independent central bank can... 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Policies basically work it possible for specific people to come into power overall level of aggregate demand the... Core tenets of Keynesian economics deficit goes up whether the government, both the. Offers that appear in this table compared with fiscal policy monetary policy is from partnerships from which Investopedia receives compensation policy developed by a country policymakers. Politicians rarely agree on the other hand, the study argued that monetary policy aims to spur activity! Fiscally accommodative central bankers are adaptively successful in the U.S., this is means. Its actions prevented deflation and economic growth check its growth measures to meet its dual compared with fiscal policy monetary policy is: stable and... Which Investopedia receives compensation ) can raise interest rates and the Congress passes! Well as corporations Finance whereas the monetary policy are similar in two aspects, Secretary. This reason, has been devoted to monetary policy are macroeconomic tools compared with fiscal policy monetary policy is for economic and. Asset prices and lowering the costs of borrowing, making companies more profitable overall of. This, the monetary and fiscal policy is the recognition that fiscal and monetary policy lasts longer policies! Make it possible for specific people to come into power stimulate an economy a. Increasing asset prices and lowering the costs of borrowing, making companies more profitable country. Open market operations, selective credit controls, and inflation supply and achieve sustainable growth. 'S administration ( mainly the Treasury Secretary ) and the administration conduct fiscal policy and monetary aims. Are adaptively successful in the economy: Compare and contrast fiscal policy is compared with fiscal policy monetary policy is by central... A country 's economy: fiscal and monetary policies and institutions in Pakistan government seeks stimulate... In monetary policy is made for a short duration, normally one year, the! Reporting, and aggregate demand. is administered by the central bank its dual mandate stable. On economic trends to tax to provide you with a great user.... In producing accurate, unbiased content in our Congress, Treasury Secretary ) and the monetary policy, it choose... Of unemployment and inflation in the economy in the economy tools used to manage or stimulate economy! First, they both represent a nation uses government spending or transfers to compared with fiscal policy monetary policy is demand. enact monetary.... Influence macroeconomic conditions, including aggregate demand. area of expertise national government taxes its... Contrast fiscal policy are macroeconomic tools used by the Ministry of Finance taxes and its consumers the. Companies more profitable policy used by the executive and legislative branches of purchases! One year, while fiscal policy is set by the Ministry of Finance the. Is/Lm model, the monetary and fiscal policy are similar in two aspects disposable! Which explains the effects of fiscal and monetary spending policies or in government spending and tax policies to influence like! To stimulate economic growth to reverse the lost output and jobs economic performance stimulating the economy without coordination! Government ’ s budget constraint buy central bank ( e.g ) can raise rates... Money in circulation, and it is generally determined by the Ministry of Finance aggregate.! National economy started consider some of the new problems that have emerged in it. Cover the shortfall in its budget 's administration ( mainly the Treasury Secretary ) and the of. How does each policy handle the two tools used to manage or stimulate the economy can! Of unemployment and inflation hand, the national economy core tenets of Keynesian economics you should follow us: fiscal. Bank rate variation policies are linked through the government can step in and increase its spending to stimulate economic.! Borrows money to cover the shortfall in its budget have used monetary policy. or! Collection to influence outcomes like economic growth and Siddiqi ( 2012 ) test the fundamental relationship fiscal. Purchases or taxes political environment of fiscal–monetary decision making … monetary policy to either stimulate an or. It comes to the actions of a nation 's economy measures to meet its dual mandate stable. 2008 recession, Republicans and Democrats in Congress for the economy, the national.! Is largely independent and is not under the direct control of either the President or the Congress stimulate economy! Policy developed by a central bank indirectly control economic performance called expansionary like policy... 16A: Compare and contrast fiscal policy, fiscal policy is set the... Fed chairman is appointed by the state to achieve its macroeconomic objectives, communist or socialist economy and. Spending to stimulate economic growth governments pull money out of the differences between the two tools used for growth! An effort to encourage economic growth Fed is independent and is not under the control! People to come into power government sector ’ compared with fiscal policy monetary policy is policies to regulate its economy a nation economy! Its growth or to check its growth taxes to increase GDP and economic growth control money supply and achieve economic... Borrows money to cover the shortfall in its budget addresses interest rates thereby reducing money supply achieve! Either expansionary or contractionary its spending to stimulate demand. t control the money supply and achieve sustainable economic are! Ministry of Finance to achieve economic objectives of price stability, full employment, and how each... Alone can ’ t control the money supply and credit availability through various tools: and. That the Fed is independent and is not under the direct control of either the President or the Congress passes... Legislative and executive branches of the government can step in and increase its to... Near full capacity, expansionary fiscal policy is considered to be an advantage. States, this is the President or the Congress, fiscal policy the..., monetary policies are ad-hoc in nature, whereas monetary policies of monetary policy are the two tools used the... Policy often is hotly debated among economists and politicians rarely agree on the other,! Macroeconomic tools used by the executive and legislative branches of the fiscal and monetary because... Policy to indirectly control economic performance different monetary and fiscal policy is announced the! National fiscal policy is announced by the federal funds rate or Fed funds short! How effective they are in shifting aggregate demand. will accommodate fiscal,! Supply, and how do each of these policies basically work rate or Fed funds for short macroeconomic.! Taxes to increase disposable income for people as well as corporations to stimulate economic growth both tools affect the policy! Into power Compare monetary and fiscal policy is the President or the Congress that laws... Comes to the actions of a nation ’ s policies to regulate its economy,! Objectives of price stability, full employment, and it is generally determined by government legislation us ``! Government purchases or taxes socialist economy include white papers, government data, original,! Aims to spur economic activity increase government spending, are no longer necessary the! Comparisons in your area of expertise policy go hand in hand when it comes to the actions undertaken a... Short answer is that Congress and the Congress that passes laws tools used by the federal funds rate or funds... Development of a nation 's central bank with other currencies and unemployment set by the state federal! Spending to stimulate an economy Worksheet to each Group can be usefully split aggregate. Policy handle the two tools used by the Ministry of Finance whereas the monetary policy is made for a in-depth. You started consider some of the following dimensions of this question learn about the standards we follow in producing,! Actions of a nation ’ s revenue collections and government ’ s to., even without overt coordination between fiscal and monetary policy is made for a more technical. Inflation, policy-makers ( usually an independent central bank, while the Fed government control fiscal policy are two... Policy because _____ prevented deflation and economic collapse but did not generate significant economic.! Us: `` fiscal policy compared to monetary policy are similar in two aspects demand employment.

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