Money, the Banking System, and Policy
Another realm of government economic activity exists apart from taxes and spending and deficits and debt. This involves the nation’s money supply and its banking system. Compared with fiscal policy and its decisions about taxes and spending, the level of interest rates and the supply of money can be somewhat remote subjects.
They are not, however, remote in their effect on the economy. In fact, monetary policy is in some ways a more useful and powerful tool for achieving the goal of high employment and low inflation. Certain monetary policy measures can change the growth rate, and even the direction, of the economy.
They can also be implemented more quickly than fiscal policy because they do not ...