Fiscal policy and monetary policy can complement each other from "summary" of The Economics of Money, Banking and Financial Markets, eBook, Global Edition by Frederic S. Mishkin
Fiscal policy and monetary policy operate through different channels but can work together to achieve common goals. Fiscal policy involves changes in government spending and taxation, which directly impact aggregate demand in the economy. On the other hand, monetary policy involves changes in the money supply and interest rates, which affect borrowing, spending, and investment decisions. When the economy is in a downturn, policymakers may use expansionary fiscal policy to stimulate economic activity by increasing government spending or cutting taxes. This injection of demand can help boost overall economic output and employment levels. However, fiscal policy may not always be sufficient to address economic challenges on its own. Monetary policy can complem...
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