There are many types of economic policies set out by the government such as a monetary, fiscal or supply-side policy. The aims of a government economic policy is to:
- Encouraging economic growth.
- Controlling or reducing inflation.
- Maintaining a satisfactory level of employment.
- Achieving a satisfactory balance of payments
The Monetary Policy Committee at the Bank of England make decisions each month about interest rates. The changes to interest rates can be made more quickly and efficiently than on taxation.
A fiscal policy includes government tax (withdrawal of money from the economy) raising revenue and influencing demand through placing a charge on goods and services. A fiscal policy also includes government expenditure (injection of money into the economy).
This type of policy has a focus on parts of the economy rather than the economy as a whole. For example, taking measures to make a labour market function efficiently.