ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Monetary policy refers to central bank activities that are directed toward influencing the quantity of money and credit in an economy. By contrast, fiscal policy refers to the government’s decisions about taxation and spending. Both monetary and fiscal policies are used to regulate economic activity over time.

Detailed explanation-2: -Fiscal Policy is carried out by the Ministry of Finance whereas the Monetary Policy is administered by the Central Bank of the country. Fiscal Policy is made for a short duration, normally one year, while the Monetary Policy lasts longer. Fiscal Policy gives direction to the economy.

Detailed explanation-3: -Fiscal policy is a means to use government spending and taxation to influence the economic situation. It is different from the monetary policy that is under the control of the central bank in that country. Together these two policies can help a country to achieve its economic goals.

Detailed explanation-4: -Monetary policies are formed and managed by the central banks of a country and such a policy is concerned with the management of money supply and interest rates in an economy. Fiscal policy is related to the way a government is managing the aspects of spending and taxation.

Detailed explanation-5: -What is the difference between fiscal and monetary policy? Fiscal policy is when the government changes taxes on government expenditures to influence the level of economic activity. Monetary policy is when the Federal reserve bank attempts to influence the money supply in order to stabilize the economy.