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    HUM 2107: Engineering Economics: Fiscal and Monetary Policy

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    Ashrafi Chisty
    This document discusses fiscal and monetary policy. [1] Fiscal policy involves how governments adjust spending and tax rates to influence the economy, while monetary policy involves how central banks manage money supply through interest rates and other tools. [2] The document outlines the tools and objectives of each policy, such as taxation, public expenditure, and controlling inflation or unemployment. [3] It also compares the key differences between fiscal and monetary policy, such as what entity administers each and whether political influence plays a role.

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    HUM 2107: Engineering Economics: Fiscal and Monetary Policy

    Uploaded by

    Ashrafi Chisty
    42 views10 pages
    This document discusses fiscal and monetary policy. [1] Fiscal policy involves how governments adjust spending and tax rates to influence the economy, while monetary policy involves how central banks manage money supply through interest rates and other tools. [2] The document outlines the tools and objectives of each policy, such as taxation, public expenditure, and controlling inflation or unemployment. [3] It also compares the key differences between fiscal and monetary policy, such as what entity administers each and whether political influence plays a role.

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    Chapter 04

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    This document discusses fiscal and monetary policy. [1] Fiscal policy involves how governments adjust spending and tax rates to influence the economy, while monetary policy involves how central banks manage money supply through interest rates and other tools. [2] The document outlines the tools and objectives of each policy, such as taxation, public expenditure, and controlling inflation or unemployment. [3] It also compares the key differences between fiscal and monetary policy, such as what entity administers each and whether political influence plays a role.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    42 views10 pages

    HUM 2107: Engineering Economics: Fiscal and Monetary Policy

    Uploaded by

    Ashrafi Chisty
    This document discusses fiscal and monetary policy. [1] Fiscal policy involves how governments adjust spending and tax rates to influence the economy, while monetary policy involves how central banks manage money supply through interest rates and other tools. [2] The document outlines the tools and objectives of each policy, such as taxation, public expenditure, and controlling inflation or unemployment. [3] It also compares the key differences between fiscal and monetary policy, such as what entity administers each and whether political influence plays a role.

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    © All Rights Reserved
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    You are on page 1of 10

    HUM 2107: Engineering Economics

    Chapter 04
    Fiscal and Monetary Policy
    What is Fiscal Policy?

    Fiscal policy is the means by which a government adjusts


    its spending levels and tax rates to monitor and influence a
    nation's economy. It is the sister strategy to monetary
    policy through which a central bank influences a nation's
    money supply. These two policies are used in various
    combinations to direct a country's economic goals. Here
    we look at how fiscal policy works, how it must be
    monitored and how its implementation may affect
    different people in an economy.
    Tools of Fiscal Policy

    1. Taxation
    2. Public Expenditure
    3. Public Debt
    4. Deficit Financing
    5. Budget etc.
    Types of Fiscal Policy
    What is Monetary Policy?

    Monetary policy is how central banks


    manage liquidity to create economic
    growth. Liquidity is how much there is in
    the money supply.
    Objectives of Monetary Policy

    The primary objective of central banks is


    to manage inflation. The second is to
    reduce unemployment, but only after
    they have controlled inflation.
    Types of Monetary Policy
    1. Central banks use contractionary monetary
    policy to reduce inflation. They have many tools
    to do this. The most common are raising
    interest rates and selling securities through
    open market operations.
    2. They use expansionary monetary policy to
    lower unemployment and avoid recession. They
    lower interest rates, buy securities from
    member banks and use other tools to increase
    liquidity.
    Tools of Monetary Policy
    Difference Between
    Fiscal and Monetary Policy
    BASIS FOR FISCAL POLICY MONETARY POLICY
    COMPARISON
    Meaning The tool used by the government in which it The tool used by the central bank
    uses its tax revenue and expenditure policies to regulate the money supply in
    to affect the economy is known as Fiscal the economy is known as
    Policy. Monetary Policy.

    Administered by Ministry of Finance Central Bank

    Nature The fiscal policy changes every year. The change in monetary policy
    depends on the economic status
    of the nation.

    Related to Government Revenue & Expenditure Banks & Credit Control

    Focuses on Economic Growth Economic Stability

    Policy instruments Tax rates and government spending Interest rates and credit ratios

    Political influence Yes No

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