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Monetary and Fiscal Policy

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Monetary and Fiscal Policy

Monetary policy is the plan to expand or contract the money supply in order to

influence the cost and availability of credit. Fiscal policy is another tool for the

government basically spending and taxing, or borrowing money. Throughout this essay I

will be writing about these two policies. I will be basically comparing and contrasting

them.

Monetary policy is more along the lines to help the nation?s money supply and

help credit so the economy can gain certain things. Fiscal policy helps control the taking,

borrowing and spending. Monetary policy comes with different plans to help, such as the

easy money supply which helps expand the money supply, it increases aggregate demand,

and promotes economic growth. Tight Money Policy is the higher interest rates and the

money supply.

Fiscal policy is like missing money. What do I mean by missing money?

Well, when you got your first paycheck at work didn?t you wonder why is your

paycheck so little or less then what you expected? Well that?s what I mean by ?missing

money.? This ?missing money? goes to federal, states, and local governments as taxes.

Another example would be when your purchasing an item and the price tag says $30 and

when the item is registered the total is $32.48. That?s the taxes making the price rise a

little higher.

In my opinion, what I basically think is that monetary policy goes for the banking

system to achieve money. For example, say that they offer C.D.?s and say I put $3000 in

a C.D at my bank and 6 months later its not $3600. So they borrowed my money to use it

for there needs and than they give it back to me with some interest. Fiscal policy works

more along the lines of taking money out of paychecks and then return them to you when

you file for your income taxes. I think the Federal government thought of a good way on

getting the money they are now receiving, I really have no problem because in the end we

get our money back, or they should return most of our money back at least.

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