Asked by Jasmine Thornton on Jul 18, 2024
Verified
The difference between fiscal policy and monetary policy is that:
A) fiscal policy is a macroeconomic policy but monetary policy is a microeconomic policy.
B) monetary policy is a macroeconomic policy but fiscal policy is a microeconomic policy.
C) fiscal policy involves regulation of natural monopolies but monetary policy involves the provision of public goods.
D) monetary policy involves regulation of the money supply but fiscal policy involves government spending and taxing.
E) fiscal policy involves the promotion of competition but monetary policy involves collecting money to pay for taxes.
Fiscal Policy
Government policy regarding taxation and spending to influence the economy.
Monetary Policy
The process by which a central bank, currency board, or other regulatory authority manages the supply of money in an economy, primarily through interest rates to achieve macroeconomic objectives like inflation, consumption, growth, and liquidity.
Money Supply
The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.
- Differentiate between fiscal policy and monetary policy.
Verified Answer
BG
Briana GarnicaJul 19, 2024
Final Answer :
D
Explanation :
Fiscal policy involves government spending and taxation to affect aggregate demand, while monetary policy involves the regulation of the money supply and interest rates to influence economic activity. Monetary policy is implemented by the central bank, while fiscal policy is decided by the government. They are both macroeconomic policies, meaning they affect the overall performance of the economy rather than individual firms or consumers.
Learning Objectives
- Differentiate between fiscal policy and monetary policy.