This thesis focuses on the effects of monetary policy and fiscal policy on private consumption in the United States (US) for the period 1954 to 2008. It has tried to analyse the relative effectiveness of the two stabilisation policies on consumption, with a particular focus on the policy tool or tools that can help address the current economic downturn. A long-run equilibrium relationship between private consumption, income, financial wealth, housing wealth, government spending, taxes, and the Federal funds rate is estimated based on Johansen's test for cointegration. Based on the results obtained, there is a positive relationship between government spending and consumption, and taxes and consumption, and a negative relationship between the funds rate and consumption. While income and housing wealth increase consumption, financial wealth decreases consumption in the long-run. Impulse response functions and variance decompositions are also studied to understand the stimulatory effects of fiscal policy and monetary policy, and their relative effectiveness. From the analysis of the impulse response functions, it can be concluded that government spending and the funds rate can be better policy tools to directly affect consumption. Of these two policy tools, the funds rate has been found to be more effective for influencing consumption from both the analysis of the impulse response functions and variance decompositions.