Monetary vs. Fiscal Policy
Central bank rate and money supply tools versus government tax and spending.
What is Monetary vs. Fiscal Policy?
Monetary policy is the Federal Reserve's domain - interest rates, open market operations, the money supply. Fiscal policy belongs to Congress and the executive - taxation and government spending. Different actors, different tools, frequently confused.
Monetary vs. Fiscal Policy: a worked example
A rate cut is monetary; a stimulus check is fiscal.
More terms in Macro & Markets
Inflation
A general rise in prices that erodes purchasing power.
Real vs. Nominal Return
Return after inflation versus the headline number.
Federal Funds Rate
The overnight interbank lending rate targeted by the Fed.
Yield Curve
A plot of Treasury yields across maturities.
Yield Curve Inversion
Short-term yields exceeding long-term yields - a recession signal.
Recession
A significant, broad, sustained decline in economic activity.
Quantitative Easing
Central bank purchases of long-dated assets to push down long rates.
Gross Domestic Product (GDP)
The total value of goods and services produced in an economy.