Price stability and achieving full employment are among the core goals of every economy’s macroeconomic policies. In this case, there are two main approaches to curtailing inflation, recession, unemployment, and other macroeconomic phenomena. These approaches are monetary and fiscal policies.
While monetary policy refers to the activities of the central bank that are directed toward influencing the quantity of capital and credit in an economy; fiscal policy refers to the government’s decisions on taxation and spending. Both monetary and fiscal policies are used to regulate economic activities over time. They can be used to accelerate growth when an economy starts to slow or to moderate growth and when an economy starts to overheat.
In plain language, the main aim of these two policies is to steer an economy in such a way that it does not experience an economic boom that could be followed by a period of low or negative growth, high level of unemployment, and an unstable price. In this situation, people can feel safe with their savings, and investment decisions, and the government can concentrate on economic decision-making.
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