Short answers, pulled from the story.
Economic policy refers to government actions setting levels of taxation, government budgets, the money supply and interest rates, the labour market, and many other areas of government intervention into the economy. It is a broad term covering both the goals governments pursue and the tools they use, including fiscal policy, monetary policy, industrial policy, regulatory frameworks, redistribution through taxes and transfers, and trade policy.
Fiscal policy deals with government revenue and expenditure decisions, including taxation, public spending, and borrowing. Monetary policy is conducted by a central bank and primarily involves manipulating short-term interest rates, open market operations, quantitative easing, and forward guidance to influence the money supply and credit conditions.
The Great Depression of the 1930s discredited laissez-faire orthodoxy by showing that automatic market adjustments would not quickly resolve recessions and that deflation can be ruinous. John Maynard Keynes's The General Theory of Employment, Interest and Money, published in 1936, provided theoretical justification for active fiscal policy and governments acting as spenders of last resort to maintain employment.
The stagflation of the 1970s, in which both unemployment and inflation rose simultaneously, undermined the Keynesian model that treated the two as a stable trade-off. Milton Friedman and the monetarist school argued that the Phillips curve unemployment-inflation trade-off does not hold over time and that government intervention could lead to economic destabilization, prompting a turn toward inflation targeting and central bank independence.
Britain adopted the gold standard in 1816, and the classical gold standard era ran from 1870 to 1914 as more countries joined. The system provided exchange rate stability but tightly constrained economic policy discretion; its rigidities became untenable during the Great Depression of the 1930s.
The 2019 Nobel Prize in Economics was awarded to Abhijit Banerjee, Esther Duflo, and Michael Kremer for their use of field experiments, including randomized controlled trials, to study the effectiveness of interventions aimed at poverty alleviation. Their work is central to the evidence-based policy movement, which emphasizes causal evidence over theoretical orthodoxy.