Monetary Policy Vs Fiscal Policy

The Federal Reserve implements monetary policy through changes in money supply as well as the rate at which banks lend money to each other overnight. Fiscal policy, on the other hand, is controlled by congress and the White House and is implemented through changes in government spending and taxes. An example of fiscal policy was when congress passed the American Recovery and Reinvestment Act in 2009 to stimulate the economy and prevent families paying taxes they could not afford. Fiscal policy was implemented over monetary policy as there was a need for immediate assistance to middle class families. The initial response to the recession was reducing
This allows them to implement changes quickly and as such be able to fix problems their enacted policy will face. Fiscal policy, on the other hand, is implemented by congress who do not meet as often as well as any changes in fiscal policy being required to go through an arduous legislative process and achieve a majority vote before they can be implemented. Further, the Fed is less affected by changes in political majority as members are chosen for their experience irrespective of which political party is in power. Alan Greenspan actually served on the Federal Reserve through different administrations, republican and democratic alike. This allows them to focus on what’s best for the economy without worrying about whether or not they will be impeached or recalled if their policies do not show positive results quickly
Expansionary fiscal policy can result in federal debt which eventually leaves the nation with a low future national income than if nothing had been done. Fiscal policy also has limits on it as it requires the lender to believe that the government will be able to pay it back. Monetary policy does not result in that though the fluctuating interest rates will affect borrowers and lenders