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Cite the difference of Monetary Policy and Fiscal Policy

Monetary Policy is the process of drafting, announcing, and implementing plan

of actions to be taken by the central banks, currency boadr or other competent

monetary authority of a country that controls the number of money in an

economy and the channels by which money is supplied (investopedia.com).

Monetary Policy is also responsible in managing money suppky and interest rate

as well as achieveing macroeconomics objective such as controlling inflation,

consumption, growth, and even liquidity.

While on the other hand, Fiscal Policy is the use use of government spending

and tax policies part of influencing economic conditions, including demand for

goods and services, employment, inflation, and economic growth. The lower the

tax, the spending and investment is high, that leads to higher demand. That

demands leads firms to hire more employees that decrease the rate of

unemployment.

The difference between the both policy is that fiscal policy is not effective without

monetary policy. Monetary Policy is concern more in producing money, and

managing it through the central bank. While the Fiscal Policy is how you properly

managed the money that is circulating in the firm or country. Monetary Policy is

also concerned more in managing the monetary supply while the Fiscal Policy is

how the congress or other lected officials managed the spending and the tax.
Money Policy can be seen through money, checks, credit, cash. That deals more

on credit. Which is consist of bonds, loans, and mortgage. While Fiscal Policy

deals with interest rates and supply. The fiscal policy’s way of making a heealthy

economic growth is through expansionary. According to thebalance.com,

expansionary fiscal policy is when the government expands the money supply in

the economy using budgetary tools to either increase spending or cut taxes—

both of which provide consumers and businesses with more money to spend.

The very idea os this is taht for the consumers to have more money that they

could spend. While on the other hand, monetary policy is using liquidity in

creating an economic growth. According to thebalance.com, central banks use

interest rates, bank reserve requirements, and the number of government bonds

that banks must hold. All these tools affect how much banks can lend. The

volume of loans affects the money supply.

In conclusion, monetary policy should work hand in hand with the national

government’s fiscal policy. This shows by government leaders being re-elected

for their strategy in reducing tax od increasing it’s spending, as an effect, they will

adopt an expansionary fiscal policy to eliminate inflation in this situation.

Source:

https://www.thebalance.com/what-is-monetary-policy-objectives-types-and-tools-3305867

https://www.thebalance.com/what-is-fiscal-policy-types-objectives-and-tools-3305844

https://www.investopedia.com/terms/m/monetarypolicy.asp
https://www.investopedia.com/terms/f/fiscalpolicy.asp

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