How does expansionary monetary policy differ from expansionary fiscal policy?
In: Economics
The scope of the tools being used is very different. Both are “expansionary” – e.g. they are designed to ultimately increase spending to spur growth.
A fiscal policy uses taxation (reduces it) and more direct government spending of a stimulus nature. It has at its disposal pretty much any means of spending (congress in the U.S.) and local/state/federal tax policy. The goal is to give consumers more money to spend (and to spend it on their behalf).
A monetary policy is limited simply to actions by the central bank – e.g. prime interest rate, increases money supply.
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