Monetary and Fiscal Policy

Monetary and Fiscal Policy
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Types of economic policies

Two types of policies are used by government to solve problems in economy.

Fiscal policy

Fiscal policy deals with Government spending, expenditure and taxation. Government covers expenditures through taxation income and rest of expenditures are financed through borrowings. In inflation season government spends less on people; more money is saved, whereas in recession season more amount is spent through savings and borrowings.

Monetary policy

Monetary policy focuses on controlling supply of money in economy. In inflation interest rates are kept high so as discourage people to get loans, thus in this way government control supply of money in economy