POLS137 Differences Between Monetary and Fiscal Policy Comparison Paper

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POLS137

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Question: compare between Monetary and Fiscal policy with Argument.

i have attached the note given for this course by my teacher. please also put down the sources you might get more idea from. Thanks.

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Running head: ESSAY

1

Comparison between Fiscal and Monetary Policies
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ESSAY

2
Differences between Fiscal and Monetary Policies

Fiscal policy and monetary policy are the two widely recognized techniques used in
influencing the economic activities of a nation. Fiscal policy is concerned with the administration
changing the rates of taxes and standards of government spending to impact aggregate need in
the economy. The legislative and executive arms of the government manage this policy. Whereas
monetary policy is concerned with the total financial supply in circulation and management of
the interest rates, generally executed by central banks, like the U.S Federal Reserve (Dosi et al.,
2005).
The monetary policy safeguards the economy's liquidity and ensures the economy is stable
throughout. The policy is isolated from the pressure from politics and is fast and flexible. It does
not increase inflation money value by interfering with its purchasing power. When inflation
grows rapidly than expected, they will sell take out circulating money by selling government
bonds. It can slow consumer spending and decrease access to credit. This policy has solid prices
that keep inflation low, which enables quality business and making financial decisions without
panicking about a sudden increase in prices (Dosi et al., 2005).
Fiscal policy, however, protects the economic development and develops through the
collection of revenues and appropriate expenditure of the government. Since the government
controls it, it has good strength if used appropriately in the economy. This policy focuses on one
section alternative to the whole economy, which can lead to fewer headaches and fewer
mistakes. Interaction of the government assists this policy by helping with the allocation of
resources (Dosi et al., 2005).

The fiscal policy manipulates the economy standard of aggregate demand to attain economic
objectives of economic growth, full employment, and stability of prices. Monetary policy is
concerned with the manipulation of the supply of finance to influence results such as inflation,
economic growth, unemployment, and other currencies exchange rates. Hence, fiscal policy
protects the o...


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