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.

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RELATED FAQS
  1. What's the difference between monetary policy and fiscal policy?

    Learn how monetary policy refers to bank actions to control interest rates and money supply, while fiscal policy refers to ... Read Answer >>
  2. How successful is fiscal policy in guiding the national economy?

    See why it is difficult to evaluate the impact of fiscal policy on the national economy and how fiscal tools have failed ... Read Answer >>
  3. Under what circumstances will a government change its monetary policy?

    Learn about the kind of variables, including political and theoretical factors, that can bring about change in a government's ... Read Answer >>
  4. Which is more effective: expansionary fiscal policy or expansionary monetary policy?

    Determine the best form of expansionary economic policy: fiscal or monetary. Both have their pros and cons and are appropriate ... Read Answer >>
  5. How can a change in fiscal policy have a multiplier effect on the economy?

    Learn about how changes in fiscal policy have a multiplier effect on the economy. The goal of expansionary fiscal policy ... Read Answer >>
  6. How is free enterprise affected by monetary policy?

    Find out how state-run monetary policy changes a free enterprise system by adjusting market rates of interest and manipulating ... Read Answer >>
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