While monetary and fiscal policy both work to keep inflation in check and control the GDP, there are characteristics of both that make them very different. Monetary policies control the amount of currency that is circulating throughout the United States. Fiscal policies come from the government directly and deal with the way the United States’ people are taxed and how the government controls their spending.
- Monetary polices are trying to control the flow of money in the economy.
- Fiscal policy is all about the government, their spending and taxing.
- Monetary and fiscal policies need to work hand in hand.
“Unlike monetary policies, fiscal policies can be more targeted and can directly influence aggregate demand. However, fiscal policy changes take longer to implement, as they’ll have to go through government dialogues and processes in order get approved.”