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Economics

Monetary and Fiscal Policies

An Overview of Monetary and Fiscal Policies

This post will help you understand the two main macroeconomic policies that are used by the government and the Reserve Bank of Australia (RBA), with reference to the Prelim Economics course. Macroeconomic policies are tools used to achieve economy-wide goals, such as economic growth, full employment and price stability. The two macroeconomic policies used are monetary policy and fiscal policy.

Monetary policy is the manipulation of interest rates, by the RBA, to achieve desired economy-wide effects.

Fiscal policy is the government’s use of taxation and government spending to influence changes in economic activity.

This video below explains these two policies to a greater extent.