{"id":32128,"date":"2021-09-28T18:14:10","date_gmt":"2021-09-28T18:14:10","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=32128"},"modified":"2023-03-24T17:38:24","modified_gmt":"2023-03-24T17:38:24","slug":"interaction-between-monetary-and-fiscal-policies","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/interaction-between-monetary-and-fiscal-policies\/","title":{"rendered":"Interaction between Monetary and Fiscal Policies"},"content":{"rendered":"\n

[vsw id=”opwhOwJygDA” source=”youtube” width=”611″ height=”344″ autoplay=”no”]<\/p>\n

Both monetary policy and fiscal policy can be utilized to influence the economy. These measures do not compete against each other. Instead, they complement each other. However, the impact of the two policies may vary or even cancel out each other.<\/p>\n

<\/p>\n

Monetary Policy<\/strong><\/h2>\n

The central bank applies monetary policy to change the cost, demand, and availability of credit. It controls credit through open market operations, bank rates, selective methods of credit control, and variable cash reserve ratio.<\/p>\n

Fiscal Policy<\/strong><\/h2>\n

Fiscal policy focuses on the government in relation to taxation, borrowing, and expenditure. These three elements mostly influence aggregate spending.<\/p>\n

The Interaction Between Monetary and Fiscal Policies<\/strong><\/h2>\n

Even though both fiscal and monetary policies can influence aggregate demand, their effect on aggregate demand may differ.<\/p>\n