Social Sciences

Start Free Trial

Which kind of action is an execution of fiscal policy, as opposed to monetary policy?

Expert Answers

An illustration of the letter 'A' in a speech bubbles

In the United States, at least, the execution of fiscal, as opposed to monetary, policy is a political action.  Fiscal policy is carried out by the elected branches of government while monetary policy is carried out the Federal Reserve, which is not elected. Thus, fiscal policy is more overtly political than monetary policy, which appears to be executed on a more technocratic basis.

Fiscal policy has to do with taxation and government spending.  By contrast, monetary policy has to do with manipulating the money supply through such things as changing interest rates and conducting open market operations.  In the United States, taxation and government spending are carried out by elected officials.  Laws about taxes, or laws that increase or decrease the level of government spending, must be enacted by Congress and carried out by the executive branch (which is directed by the president).  This type of policy is under the direct control of elected officials.  By contrast, monetary policy is carried out by the Fed.  Elected officials can try to put pressure on the Fed to act in certain ways, but they have no actual authority to force the Fed to do anything.

Thus, we can say that the execution of fiscal policy is a political action while the execution of monetary policy is not.

Approved by eNotes Editorial Team