1. The policy of government in which it utilizes its tax revenue and expenditure policy to influence the aggregate demand and supply for products and services the economy is known as Fiscal Policy. 1. The policy through which the central bank controls and regulates the supply of money in the economy is known as Monetary Policy.
2. Fiscal Policy is carried out by the
Ministry of Finance whereas the 2. Monetary Policy is administered by the
Central Bank of the country.
3.
Fiscal Policy is
made for short duration, normally one year, while the 3. Monetary Policy lasts longer.
4.
Fiscal Policy
gives direction to the economy. 4. On the other hand, Monetary Policy brings
price stability.
5. Fiscal Policy is concerned with
government revenue and expenditure, 5. Monetary Policy is concerned with
borrowing and financial arrangement.
6.
The major
instruments of fiscal policy are tax rates and government spending. 6.
Conversely, interest rates and credit ratios are the tools of Monetary Policy.