The Difference Between Fiscal and Monetary Policy

The video tutorial explains the concerns of high unemployment and inflation, and how governments use fiscal and monetary policies to address these issues. Fiscal policy involves government spending and taxation, with tools like the multiplier effect to influence economic output. Expansionary and contractionary policies are used to manage economic growth and inflation. Monetary policy, managed by central banks, involves money supply and interest rates, with tools like reserve ratios and open market operations. Both policies aim to maintain low unemployment and curb inflation for steady economic growth.

What are the two main tools used by governments to influence the economy?

Explain the concept of the multiplier effect in fiscal policy.

What is the difference between expansionary and contractionary fiscal policy?

How do supply side economics and Keynesian economics differ in their approach to fiscal policy?

Describe the role of the Federal Reserve System in monetary policy.

What are the three main tools of monetary policy?

In what ways can fiscal and monetary policy help achieve economic stability?