![Picture](/uploads/7/8/3/3/78338388/775330.jpg?1461089971)
Monetary Policy and Fiscal policy are the two major tools used in the economy. Monetary policy is manages interest rates and the total supply of money circulating the economy. The Federal Reserve handles monetary policy. Fiscal policy includes the taxing and spending actions of a government. The Executive and Legislative branches in the United States deal with fiscal policy.
Monetary PolicyMonetary policy is the process by which the United States government controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.The Federal Reserve has frequently used three different policy tools to influence the economy: opening market operations, changing reserve requirements for banks and setting the "discount rate."
|
Fiscal PolicyFiscal policy is the means by which the United States government adjusts its spending levels and tax rates to monitor and influence our nation's economy. If the government believes there is not enough spending or there is not enough business activity in the economy, it can increase the amount of money it spends, often referred to as "stimulus" spending. If there are not enough tax receipts to pay for the spending increases, the government borrows money by issuing debt securities and, in the process, accumulate debt, or "deficit" spending.
|