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What is the difference between fiscal policy and monetary policy?

Posted on April 14, 2014 at 7:45 PM

Fiscal policy consists of actions taken by the government to bring about full employment. In the Keynesian model, fiscal policy consists of changes in government spending and/or changes in income taxes.

Monetary policy consists of actions taken by the Federal Reserve to bring about full employment and to promote price stability. The most important tool of the Fed is open market operations (buying and selling of government bonds).

AP Macroeconomics Unit 4 Monetary Policy

Categories: AP Macroeconomics, Macro Unit 4 Monetary Policy

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