Personal Finance Investing Monetary policy vs. fiscal policy: Two main tools used to maintain a stable and balanced economy Facebook Email Twitter LinkedIn Copy Link Read in app The Federal Reserve sets monetary policy, while the president and Congress establish fiscal policy. JUMP TO Section Monetary policy vs. fiscal policy: At a glance What is monetary policy? What is contractionary monetary policy? What is expansionary monetary policy? What is fiscal policy? Monetary policy vs. fiscal policy: At a glance What is monetary policy? What is contractionary monetary policy? What is expansionary monetary policy? What is fiscal policy? Our experts answer readers’ investing questions and write unbiased product reviews ( here’s how we assess investing products ). Paid non-client promotion: In some cases, we receive a commission from our partners . Our opinions are always our own. 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. Advertisement 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 Federal Reserve , and fiscal policy, which falls under the auspices of Congress and the president. Both play important roles in maintaining a stable and balanced US economy. Monetary policy vs. fiscal policy: At a glance Although monetary and fiscal policy are both designed to achieve economic stability, the officials responsible for them approach that goal on different fronts. The primary difference between fiscal and monetary policy is […]
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