Fiscal Policy and Monetary Policy

By manipulating government spending and taxes in order to stimulate or slow down growth, this economical management which effect of the aggregate or total demand for goods and services is called fiscal policy.

On the other hand, monetary policy attempts to control the amount of money in circulation or the cost and availability of credit. The objective is straightforward even if difficult to put into practice. If money is readily available because, say, interest rates are low, people can afford to borrow and spend. But unless production keeps pace, there will not be enough goods and services to meet the demand this borrowing and spending creates. In the face of the excessive demand, producers and suppliers have incentives to raise their prices. As time ...