How do you distinguish fiscal policy from monetary policy?

Answer 1

Opinions about if fiscal policy or monetary policy is better will vary depending on who you ask. One country may benefit greatly with fiscal policy, while another may not. It all has to do with their economic system.

Answer 2

When a government uses its taxing and spending to have an impact on the economy, it is known as fiscal policy. Monetary policy is used to slow the economy or ignite it but is controlled by the central bank.

Answer 3

Although both fiscal and monetary policy are used to influence the economy in a desired way, they are distinguishable based on who enacts them. Fiscal policy, or more specifically, discretionary fiscal policy, is the policy of the government, in terms of changing taxation or spending. If the government increases taxes (or decreases), that is a fiscal policy. Monetary policy is enacted by whoever controls the money supply of a nation. In the case of the United States, this is the Federal Reserve (our "central bank"). This acts, ideally, separately from the government. They can do things like increase/decrease the money supply with OMOs, change the reserve ratio, or change the discount rate; these three actions would be classified as monetary policy.

Answer 4

Monitary Policy is usually carried out by the Central Bank / Monetary authorities and involves:

1) Setting base interest rates (e.g. Bank of England in UK and Federal Reserve in US)

2) Influencing the supply of money. E.g. Policy of quantitative easing to increase the supply of money.

Fiscal Policy is carried out by the government and involves changing:

1) Level of government spending

2) Taxation

and hence this influences the level of government borrowing

Answer 5

With respect to the impact of governmental policies, there is a dispute as to the relative importance of monetary policy (controlling the money supply) and fiscal policy (government expenditures and taxes).

Answer 6

Fiscal policy deals with the taxation and spending practises of the government of a polity. Changing fiscal policy affects the level of taxation and spending a government conducts to enact its programs.

Monetary policy deals with the production, distribution, and rules governing the use of money in a polity. Changing monetary policy affects the level and availability of the money supply (currency).

Answer 7

Monetary policy is the process by which the monetary policy of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.The official goals usually include relatively stable prices and low unemployment. Monetary theory provides insight into how to craft optimal monetary policy. It is referred to as either being expansionary or contractionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it. Expansionary policy is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that easy credit will entice businesses into expanding. Contractionary policy is intended to slow inflation in hopes of avoiding the resulting distortions and deterioration of asset values

And fiscal policy is:

Fiscal policy can be contrasted with the other main type of macroeconomic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and spending. The two main instruments of fiscal policy are government expenditure and taxation. Changes in the level and composition of taxation and government spending can impact the following variables in the economy:

• Aggregate demand and the level of economic activity;
• The pattern of resource allocation;
• The distribution of income.

Answer 8

They are the same