Monetary policy

it attempts to stabilize the economy by controlling the interest rates and money supply.
Expansionary: when govt decrease interest rates. as a result money supply in the market is increased . this helps to combat unemployment
Contractionary:when govt increase interest rates. as a result money supply in the market is decreased . this helps to combat inflation

Tools:
open market operations (selling buying bonds etc)
reserve requirement (FOR BANKS)
discount window


Fiscal policy
use of govt spending and revenue collection to influence economy

expansionary: when spending more than taxation (larger budget deficit)
contractionary: when spending less than taxation (larger budget surplus)
neutral: when spending equal to taxation

instruments/tools:
govt spending and taxation

Govt spending or Expenditure is funded by

• taxation
• seignorage
• borrowing money from population
• consumption of fiscal reserves
• sale of assets

taxation: it transfer of assets from people to govt.
monetarization of deficit: to finance deficit by borrowing from central bank.