Economic Swat

Difference between Monetary Policy and Fiscal Policy:- (1)- • In Monetary Policy the changes are in interest rate/money supply. • In Fiscal  Policy the  changes are in government spending and and tax rate. (2)- • Monetary Policy is set by a central bank. • Fiscal Policy is set by the government. (3)- • Target of Monetary Policy is to achieve inflation. • There is no specific target of Fiscal Policy. (4)- • The side effect of Monetary Policy is on exchange rate and housing market. • In Fiscal Policy the side effect is on government budget/borrowing. (5)- • Monetary policy is mostly free from the political process.  • In Fiscal policy strong political dimension for changing tax rates.

Fiscal Policy:- Fiscal policy means the use of government spending and taxation for stabilization of economic conditions. Fiscal policy is set by the government. Types of Fiscal Policy:- 1- Expansionary Fiscal Policy 2- Contractionary Fiscal Policy 1- Expansionary Fiscal Policy:- An Expansionary fiscal policy is used in unemployment and recession condition or deflation condition. Expansionary fiscal policy leads to the government lowering taxes or spending more or do both ( government lowering taxes and spending more) for improving the economy. 2- Contractionary Fiscal Policy:- An Contractionary fiscal policy is used in inflation condition. Contractionary fiscal policy leads to the government raises taxes or cuts spending or do both (raises taxes and cuts spending) for controlling inflation condition. Objectives of Fiscal Policy:- 1- To maintain and achieve full employment 2- To stabilise the growth rate of the economy 3- To stabilise the price level 4- To maintain equilibrium in t...

  Monetary Policy:- Monetary Policy is the Macroeconomic Policy and it refers to the credit control measures adopted by the Central Bank of a country. It is a demand side economic policy used by the government of a country to achieve macroeconomic objectives like- consumption, inflation, liquidity and growth. Monetary policy is set by a central bank. Types of Monetary Policy:- 1- Expansionary Monetary Policy 2- Contractionary Monetary Policy 1- Expansionary Monetary Policy:- It is also called as Easy Monetary Policy and used to overcome depression or a recession economic condition. When there is a deflation condition in an economy, the central bank starts an expansionary monetary policy that eases the credit market condition and leads to an upward in aggregate demand. It decreases the cost and availability of credit in the money market, and improves the economy. 2- Contractionary Monetary Policy:- It is also called as Dear Monetary Policy and used to overcome an inflationary gap. W...

  Capital Market:- It is a long-term securities market which deals in Financial instruments and commodities. The maturity period of capital market is more than 1 year. Capital market provide ease of transactions for both the investor and the companies. Capital market commonly refers to as a stock market. Types of Capital Market:- There are two types of capital market they are- 1. Primary Market 2. Secondary Market 1. Primary Market:- When for the first time the New securities are issued in a  market known as primary market. The main function of primary market is capital formation. 2. Secondary Market:- The market for old securities. They commonly known as stock exchange or stock market. Here securities are bought and sold by investors. Functions of Capital Market:- (1)- Economic Growth (2)- Continuous Availability of Funds (3)- Stable and Systematic Security Prices (4)- Cost Minimisation for Transaction and Information (5)- Facilitates Trading of Securities (6)- Promotes Savin...