Both
monetary and fiscal policies are related as components of a federal economic policy that
influences growth. While monetary policy is overseen by the Federal Reserve, fiscal policies
involving taxes and government spending are the result of compromise between the two major
political parties in the executive and legislative branches.
Monetary and
fiscal policies are related in the sense they represent an era of economic conditions. Fiscal
policies have much more effect on consumers and the economy than monetary policies. One of the
key facets of monetary policy is that the Federal Reserve sets interests rates, which affects
how much borrowing activity occurs in the business world. The corporate tax rate on the fiscal
policy side also affects the overall economy.
Fiscal policy can lead to
increased employment and a stable economy. Monetary policy can be used to stimulate business
investment. Both fiscal and monetary policies are used as tools to respond to economic
conditions and try to create solutions to financial uncertainty.
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