Monetary policy is an important part of the U.S. government’s decision to formulate economic practices and regulations, but equally important is fiscal policy. Government expenditure and tax reform are designed to stimulate the economy. To understand the importance of monetary policy in the equation, we must first understand the meaning of this term. The Economic Times defines monetary policy as “macroeconomic policy formulated by the central bank”, which manages interest rates and money supply, and acts as a demander of economic policy to influence inflation, consumption, growth and liquidity. However, since monetary policy depends on interest rates and currency circulation, its impact on the economy is limited. Once interest rates fall to zero, the Fed can do little to help the economy in terms of monetary policy. The State Department believes that one of the key reasons why monetary policy is beneficial in a period of financial success is that it has a positive impact on inflation, but is relatively useless in dealing with unemployment. That’s because the Federal Reserve’s ability to manipulate the dollar’s plummeting global value (or exchange rate) is limited. Monetary policy mainly affects interest rates by controlling the amount of money in circulation (and other factors), so when interest rates reach zero percent, banks are powerless. Looking back at the Great Depression, more than 3,000 banks collapsed in the 1930s – when the dollar fell to its lowest level in history, monetary policy was of little significance. On the contrary, fiscal policy and a series of unpopular but successful economic policies have helped America get back on its feet. Fiscal policy has opened up new jobs and increased government spending to correct the market collapse. Basically, the United States — or any governing body — can develop proactive fiscal policies to counter market stagnation when needed. As the U.S. economy is currently experiencing its highest level in the past decade, monetary policies to reduce taxes and increase government spending in the business and job creation markets, especially under former President Barack Obama, have led to a decline in unemployment. America’s GDP is growing rapidly.