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