Summary

Monetary policy includes the control of money supply and interest rates

In the UK the bank of England is in charge of monetary policy and their main tool is interest rates

Exchange rates look at the value of one currency in terms of another

Fixed exchange rates can be used by governments to create stability within an economy

Taxation is the way the government earns revenues

Direct taxes are levied on wages and businesses

There has been a growing budget deficit under Gordon Brown

Fiscal and monetary policy used to both be the job of the chancellor now monetary policy is the Bank Of England's job however it is still influenced by fiscal policies

There are a number of potential conflicts between policy objectives e.g. between low unemployment and low inflation