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Di erence Between Fiscal Policy and Monetary

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Last updated on July 26, 2018 by Surbhi S
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The economic position of a country can be monitored, controlled and
regulated by the sound economic policies. The fiscal and monetary
RELATED DIFFERENCES
policies of the nation are the two measures, which can help in bringing
stability and developing smoothly. Fiscal policy is the policy relating to
government revenues from taxes and expenditure on various projects. Difference Between Bank Rate and
Monetary Policy, on the other hand, is mainly concerned with the flow of Repo Rate
money in the economy.
Difference Between Economics and
Economy
Fiscal policy alludes to the government’s scheme of taxation, expenditure
and various financial operations, to attain the objectives of the economy. Difference Between Grant and Loan
On the other hand, monetary policy, scheme carried out by the financial
Difference Between Central Bank
institutions like the Central Bank, to manage the flow of credit in the
and Commercial Banks in India
country’s economy. Here, in this article, we provide you all the differences
between the fiscal policy and monetary policy, in tabular form. Difference Between Tax Planning
and Tax Management
Content: Fiscal Policy Vs Monetary Policy
1. Comparison Chart
2. Definition
3. Key Differences NEW ADDITIONS
4. Conclusion

Difference Between Internal and

Comparison Chart External Environment

Difference Between Fiction and

BASIS FOR Nonfiction
FISCAL POLICY MONETARY POLICY
COMPARISON
Difference Between Novel and Book

Difference Between Supermarket

and Hypermarket

Difference Between Poll and Survey

 BASIS FOR Difference Between Theme and
FISCAL POLICY MONETARY POLICY Topic
COMPARISON
Difference Between Newspaper and
Meaning The tool used by the The tool used by the
Magazine
government in which it uses central bank to
its tax revenue and regulate the money Difference Between Duties and
expenditure policies to affect supply in the economy Responsibilities
the economy is known as is known as Monetary
Difference Between Summary and
Fiscal Policy. Policy.
Paraphrase
Administered Ministry of Finance Central Bank
Difference Between Geography and
by
Geology
Nature The fiscal policy changes The change in
every year. monetary policy
depends on the
economic status of the
nation.

Related to Government Revenue & Banks & Credit Control

Expenditure

Focuses on Economic Growth Economic Stability

Policy Tax rates and government Interest rates and

instruments spending credit ratios

Political Yes No
influence
 Key Differences
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De nition of Fiscal Policy

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When the government of a country employs its tax revenue and
expenditure policies to influence the overall demand and supply for Be the first of your friends to like this

commodities and services in the nation’s economy is known as Fiscal

Policy. It is a strategy used by the government to maintain the equilibrium Key Differences
on Tuesday
between government receipts through various sources and spending over
different projects. The fiscal policy of a country is announced by the What exactly is the difference between
foreword and preface? Learn about the two
finance minister through budget every year. terms here..
https://keydifferences.com/difference-
between-foreword-and-…
If the revenue exceeds expenditure, then this situation is known as fiscal
surplus, whereas if the expenditure is greater than the revenue, it is
known as the fiscal deficit. The main objective of the fiscal policy is to
bring stability, reduce unemployment and growth of the economy. The
instruments used in the Fiscal Policy are the level of taxation & its
composition and expenditure on various projects. There are two types of
fiscal policy, they are:

Expansionary Fiscal Policy: The policy in which the government

minimises taxes and increase public spending.
Contractionary Fiscal Policy: The policy in which the government
increases taxes and reduce public expenditure.

De nition of Monetary Policy

Monetary Policy is a strategy used by the Central Bank to control and
regulate the money supply in an economy. It is also known as credit policy.
In India, the Reserve Bank of India looks after the circulation of money in
the economy.

There are two types of monetary policies, i.e. expansionary and

contractionary. The policy in which the money supply is increased along
with minimization of interest rates is known as Expansionary Monetary
Policy. On the other hand, if there is a decrease in money supply and rise
in interest rates, that policy is regarded as Contractionary Monetary
Policy.

The primary purposes of the monetary policy include bringing price

stability, controlling inflation, strengthening the banking system,
economic growth, etc. The monetary policy focuses on all the matters
which have an influence on the composition of money, circulation of
credit, interest rate structure. The measures adopted by the apex bank to
control credit in the economy are broadly classified into two categories:

General Measures (Quantitative Measures):

Bank Rate
Reserve Requirements i.e. CRR, SLR, etc.
Repo Rate Reverse Repo Rate
Open market operations
Selective Measures (Qualitative Measures):
Credit Regulation
Moral persuasion
 Direct Action
Issue of directives

Key Di erences Between Fiscal Policy and

Monetary Policy
The following are the major differences between fiscal policy and
monetary policy.

1. The policy of the government in which it utilises its tax

revenue and expenditure policy to influence the aggregate
demand and supply for products and services the economy is
known as Fiscal Policy. The policy through which the central
bank controls and regulates the supply of money in the
economy is known as Monetary Policy.

2. Fiscal Policy is carried out by the Ministry of Finance whereas

the Monetary Policy is administered by the Central Bank of the
country.

3. Fiscal Policy is made for a short duration, normally one year,

while the Monetary Policy lasts longer.

4. Fiscal Policy gives direction to the economy. On the other hand,

Monetary Policy brings price stability.

5. Fiscal Policy is concerned with government revenue and

expenditure, but Monetary Policy is concerned with borrowing
and financial arrangement.
 6. The major instrument of fiscal policy is tax rates and
government spending. Conversely, interest rates and credit
ratios are the tools of Monetary Policy.

7. Political influence is there in fiscal policy. However, this is not

in the case of monetary policy.

Conclusion
The main reason of confusion and bewilderment between fiscal policy
and monetary policy is that the aim of both the policies is same. The
policies are formulated and implemented to bring stability and growth in
the economy. The most significant difference between the two is that fiscal
policy is made by the government of the respective country whereas the
central bank creates the monetary policy.

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India

Filed Under: Finance

Comments

Arun Sannae says

July 15, 2016 at 5:17 am

A very simple language to understand complex process of

economic growth.

Reply
Jayant says
October 15, 2016 at 5:24 pm

It is indeed very useful. such big/Important terms, explained so

well.

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Abhishek G says
October 18, 2016 at 11:52 pm

Thumbs up….very good comparison.

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anandhi vivekanandan says

February 2, 2017 at 10:11 am

precise and comprehensive…..very very useful

Reply

Surbhi S says
February 2, 2017 at 12:15 pm

Thank you very much for sharing your views with us.

Reply

Raheel says
February 22, 2017 at 2:54 pm

fruitful knowledge

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Greg says
April 11, 2017 at 8:32 pm

Well done
Reply

Gurdeep Sodhi says

April 22, 2017 at 10:19 pm

Precise and very clearly explained. Thanks for good information

Reply

Kenny says
September 29, 2017 at 7:50 pm

Helpful

Reply

Student says
November 10, 2017 at 11:54 pm

Effective and efficient!

Reply

raghu ram says

February 21, 2018 at 11:26 am

very nice and lucid way of expression

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Surbhi S says
February 21, 2018 at 12:25 pm

Thank you all the readers, for constantly appreciating us. It

means a lot. Keep visiting

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aqaad Ahmad says

February 10, 2019 at 12:35 pm
 thumbs up

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Sandhavi says
April 24, 2019 at 12:02 am

Good one

Reply

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