Question

What is the basic difference between fiscal and monetary policy, and what is the common objective of these policies?

Answer 1

1. Difference: Fiscal policy is budgetary policy or revenue and expenditure policy of the government to correct the situations of deflationary gap or inflationary gap. Monetary policy is the policy to correct the situations of inflationary or deflationary gaps through increase or decrease in the flow of credit/money in the economy.
2. Common Objective: To ensure economic stability by correcting the situations of inflationary or deflationary gaps.