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Fiscal Policy and Monetary Policy - Coggle Diagram
Fiscal Policy and Monetary Policy
Monetary policies
Discipline of economic policy that controls monetary factors to ensure price stability and economic growth.
Can be expansive.
Increase the quantity of money in the country to stimulate investment and economic growth.
Try to reduce the quantity of money with the objective of reducing inflation.
Is to maintain price stability, control inflation.
Defines the inflation target, its range and the timeframe for achieving it.
Watch core inflation.
Analyzes all the causes of inflation.
Communicates relevant economic information in a transparent manner.
The tool used by Banco de México, in order not to deviate from its inflation target, is the target interest rate.
Fiscal policies
Discipline of a country's economic policy focused on the management of a State's resources and their administration.
It is in the hands of the country's government.
Controls spending and revenue levels through variables such as taxes and public spending.
To maintain a level of stability in the country.
Can also be expansionary or restrictive
Can decide to spend money on providing public services, supporting the economy and reducing inequalities.
They can raise that money through taxes or borrow it on the financial markets.
Interest rates are one of its tools.
Monetary and fiscal policy are instruments for maintaining the good health of the economy. Both influence the economy, but in different ways.
They must go hand in hand for the economy to run smoothly.
New challenges require new monetary and fiscal policy responses.
Their sets are especially relevant when the economy is experiencing difficulties.