- Mechanics of Monetary and Fiscal Policy
- What is Money?
- How is Money Created?
- Official Measures of Money: M1 and M2
- Demand and Supply of Money
- Fisher Effect
- What do Central Banks do?
- Tools for Implementing Monetary Policy
- Features of Effective Central Banks
- The Monetary Policy Transmission Mechanism
- Expansionary vs. Contractionary Monetary Policy
- Limitations of Monetary Policy
- Role of Fiscal Policy
- Tools of Fiscal Policy
- Fiscal Multiplier and Balanced Budget Multiplier
- Ricardian Equivalence
- Challenges in Implementing Fiscal Policy
- Expansionary Vs. Contractionary Fiscal Policy
- Combined Effects of Monetary and Fiscal Policy
Mechanics of Monetary and Fiscal Policy
Monetary and Fiscal policies are the two economic policies employed by the government in an economy to control the aggregate demand.
Using the fiscal policy, the government controls their own expenditure and revenue collection in order to control the economy.
Using the monetary policy, the central bank of the country influences the money supply and interest rates in the economy to stimulate demand, control inflation, and stabilize currency.
The following video by Khan Academy explains the basic mechanics of monetary and fiscal policy.