Policy Mix

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DEFINITION

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.



INVESTOPEDIA EXPLAINS

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
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  3. Accommodative Monetary Policy

    When a central bank (such as the Federal Reserve) attempts to expand the overall ...
  4. Tight Monetary Policy

    A course of action undertaken by the Federal Reserve to constrict spending in ...
  5. Central Bank

    The entity responsible for overseeing the monetary system for a nation (or group ...
  6. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly called, regulates ...
  7. Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics ...
  8. Monetary Base

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