Monetary policy is used to control the size of the money supply to stimulate or moderate business activity levels in the economy. in contrast, fiscal policy uses government spending and taxation to do the same.
<h3>What is monetary and fiscal policy?</h3>
Fiscal policy are the steps taken by the government to change the business levels in the economy. The tools of fiscal policy are taxes and government spending. Fiscal policy can be expansionary or contractionary.
Expansionary fiscal policy is when the government increases the money supply in the economy either by increasing spending or cutting taxes. Contractionary fiscal policies is when the government reduces the money supply in the economy either by reducing spending or increasing taxes
Monetary policy are policies taken by the central bank of a country to shift aggregate demand. The tools of monetary policy are open market operations, reserve requirement and discount rate.
Expansionary monetary policy are polices taken in order to increase money supply. Contractionary monetary policy are policies taken to reduce money supply.
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