Fiscal Policy and Monetary Policy By manipulating government spending and taxes in order to stimulate or slow down growth, this economical management which effect of the aggregate or total demand for goods and services is called fiscal policy. On the other hand, monetary policy attempts to control the amount of money in circulation or the cost and availability of credit. The objective is straightforward even if difficult to put into practice. If money is readily …showed first 75 words of 404 total…

…showed last 75 words of 404 total…fiscal policy and a lack of well-defined objectives and targets. Temporary, cyclical improvements in the fiscal position were misinterpreted as permanent, structural improvements. Moreover, fiscal policy had not been supporting monetary policy to help dampen inflationary pressures in the late 1980s and, after the economy returned to trend around 1991, the fiscal position rapidly deteriorated. During the ensuing downturn significant tax increases and spending restraint were required to return the public finances to a sustainable path.