What is the difference between monetary and fiscal policy?

What is the difference between monetary and fiscal policy?

Monetary policy involves managing the money supply and interest rates, while fiscal policy focuses on government spending and taxation.

Can you give examples of each?

Sure! An example of monetary policy is when a central bank lowers interest rates to stimulate the economy. Fiscal policy example is increasing government spending on infrastructure.

Which one is more effective in controlling inflation?

Monetary policy is generally more effective for controlling inflation, as it directly influences interest rates and money supply.

How do these policies impact unemployment?

Both policies can impact unemployment; fiscal policy can create jobs through government spending, while monetary policy can stimulate investment and hiring.