Monetary Policy Vs. Fiscal Policy: Comparison, Examples

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  • Monetary policy seeks to control the economy by manipulating the money supply and interest rates.
  • Fiscal policy is designed to achieve the same end using targeted taxes and spending.
  • The Achilles heel of both types of policy are lags between implementation and results.
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In 1992 when presidential campaign advisor, James Carville, famously told Bill Clinton’s staff, “It’s the economy, stupid!” he was stressing the importance of what matters most to a majority of voters.

The two most widely recognized tools to influence the economy, and keep constituents happy, are monetary policy, created by the

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