What is the difference between monetary policy and fiscal policy ? In what sense

Question

What is the difference between monetary policy and fiscal policy?  In what sense are  fiscal and monetary policy similar? Explain.

ii) Suppose that consumers become pessimistic about the future health of the economy. What will happen to aggregate demand, output, and employment in the short run? Use the AD/AS figure to illustrate.

iii) Considering the macroeconomic effects of pessimism, what might the President and Congress have to do to keep output and employment  stable? Use your AD/AS figure to explain and illustrate.

iv) In the same circumstances, what can the Federal Reserve Bank do to keep output and employment stable? Use your AD/As figure to explain and illustrate.

Explanation / Answer

Monetary policy is typically implemented by a central bank, while fiscal policy decisions are set by the national government. However, both monetary and fiscal policy may be used to influence the performance of the economy in the short run.

Basics

In general, a stimulative monetary policy is expected to improve the economy

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