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.


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.

  1. Fiscal Policy

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

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

    The total amount of a currency that is either circulated in the ...
  4. Macroeconomics

    The field of economics that studies the behavior of the aggregate ...
  5. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  6. Central Bank

    The entity responsible for overseeing the monetary system for ...
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  1. What happens if interest rates increase too quickly?

    When interest rates increase too quickly, it can cause a chain reaction that affects the domestic economy as well as the ... Read Full Answer >>
  2. When was the last time the Federal Reserve hiked interest rates?

    The last time the U.S. Federal Reserve increased the federal funds rate was in June 2006, when the rate was increased from ... Read Full Answer >>
  3. Do lower interest rates increase investment spending?

    Lower Interest rates encourage additional investment spending, which gives the economy a boost in times of slow economic ... Read Full Answer >>
  4. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  5. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  6. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>

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