How_Money_Works_-_The_Facts_Visually_Explained

NEWS

Accountability

How it works

Democratic countries typically insist that governments

report annually to their legislative bodies about

taxation and spending plans for the next year. This

annual budget has become the central instrument of

government fiscal policy, and its contents are widely

scrutinized. Before the 2008 crash, monetary policy

had been increasingly left to central banks. However,

since then the policy and the banking system’s role in

it have been subject to more rigorous examination, and

taxation and spending plans now tend to dominate the

debate during national elections.

Responsibility for economic policy is usually shared between a country’s

government and its central bank. By reporting their decisions to the public and

to democratic institutions, they can be made more accountable to the people.

Media reports

on budget

The media reports

on changes to the

government budget

and how they will

affect the public.

Legislative body

approves budget

A country’s legislative body,

typically an elected

parliament, will debate the

budget and potentially

make changes.

Auditors inspect

public finances

Many countries have

an independent

body that inspects

the government’s

financial decisions.

Public adjusts its

spending habits

Knowledge about the

budget may inform

decisions by households

and firms on spending

and saving money.

Government draws

up a budget

Typically an annual budget

allocates spending across

different resources.

FISC AL IMPAC T

Government policymakers take a

long-term perspective. To achieve

the best economic outcomes,

central bank policymakers need

to be guided by this perspective.

$

MONETARY IMPACT

Central bank decisions on

monetary policy affect

government spending due

to the impact of interest

rates on employment and

inflation in particular.

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