Difference between Fiscal Policy and Monetary Policy with its comparison

In this article we will discuss about Difference between Fiscal Policy and Monetary Policy with its comparison.


FISCAL POLICY

Fiscal policy is a policy used by government to collect revenue and expenditure and it helps to influence economy. Revenue is generated from the taxes whether those taxes are direct or indirect taxes. Fiscal policy alludes to the government’s scheme of taxation, expenditure and various financial operations, to attain the objectives of the economy. Fiscal policy refers to that policy which is administered by Ministry of Finance. Fiscal policy is changed every year according to government rules and regulations. It is an instrument used by government to maintain equilibrium between government receipts by different sources and spending on different projects.

MONETARY POLICY

Monetary policy is mainly concerned with the flow of money in economy. It means changing the interest rate and influence money supply in economy. Monetary policy is mainly controlled by financial institutions like Central bank who manages the flow of money in economy.

It doesn’t change yearly it depends on the economic status and change according to change in economy. It is a policy in which central bank maintain liquidity in economy. Monetary policy helps to manage inflation and reduce unemployment in economy.

 Difference between Fiscal Policy and Monetary Policy with its comparison

BASIS FISCAL POLICY MONETARY POLICY

Meaning

Fiscal policy is a policy used by government to collect revenue and expenditure and it helps to influence economy.

Monetary policy is mainly concerned with the flow of money in economy. It means changing the interest rate and influence money supply in economy.

Controlled by

Ministry of Finance

Central bank

Focus on

Its main focus on Economic growth

Its main focus on economic stability

Nature

Fiscal policies changes every year

Monetary policies depend on the change of economy.

Maintains

Government revenue and expenditure

Banks and Credit control

Instruments involves

Tax rates and government spending

Credit ratios and interest rates.

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