Difference between Monetary Policy and Fiscal Policy

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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.

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