Policy Mix

DEFINITION of 'Policy Mix'

A government's combined use of fiscal policy and monetary policy to attempt to manage the economy. Monetary and fiscal policies affect each other, and the right policy mix is supposed to achieve desirable macroeconomic outcomes such as price stability, credit availability, economic growth and financial stability.

BREAKING DOWN 'Policy Mix'

Monetary policy refers to a national government's handling of the money supply and interest rates. These are often managed by a central bank (in the case of the United States, the Federal Reserve sets the country's monetary policy). Fiscal policy refers to a national government's taxing and spending behavior. An example of a policy mix would be tight monetary policy combined with easy fiscal policy.

RELATED TERMS
  1. Tight Monetary Policy

    A course of action undertaken by the Federal Reserve to constrict ...
  2. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  3. Easy Money

    In the most literal sense, money that is easily acquired. Academically ...
  4. Monetary Base

    The total amount of a currency that is either circulated in the ...
  5. Accommodative Monetary Policy

    When a central bank (such as the Federal Reserve) attempts to ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate ...
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RELATED FAQS
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    When interest rates increase too quickly, it can cause a chain reaction that affects the domestic economy as well as the ... Read Full Answer >>
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