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31 May, 2013

Easy Difference between Monetary policy and fiscal policy

In the econonmics ,monetary policies and fiscal policies  are very much important and good use to suppress the circulation of money in the market.
Monetary policy: In this, government increase the rate of interest on bank loans.
Fiscal policy: In this,government increase the tax rate and decrease in subsidy.
Why it is done ?
1.Decrease money circulation:

Due to increase in price by inflation ,the circulation of money also increases due to which further inflation increases.
And all these inflation arises due to more demand of public when supply is less.
For suppressing the public demand rate of interest on bank loan, tax increases and subsidy decreases by government.

2.Increase wealth of banks:
Due to increase in interest rate,now bank can attain more benefit.
3.Decrease of inflation rate:
If money circulation is suppressed then consecutively inflation rate also decreases
4.Welfare of poor people:
If the inflation decrease then price will be decreased and more poor people can purchase the goods.

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