This paper aims to compute optimal monetary and fiscal policy rules in a real business cycle model that includes sticky prices, a demand for money, taxation, and stochastic government consumption. The authors focus on simple policy rules where the nominal interest rate is set as a function of output and inflation, and taxes are set as a function of total government liabilities. The key findings are: 1. The size of the inflation coefficient in the interest-rate rule has a minor impact on welfare, except when it affects the determinacy of equilibrium. 2. Optimal monetary policy features a muted response to output, and interest rate rules with a positive response to output can lead to significant welfare losses. 3. The optimal fiscal policy is passive, but the welfare losses associated with an active fiscal stance are negligible. The authors relax several empirically unrealistic assumptions commonly made in the literature, such as the absence of capital accumulation, active fiscal policy, and zero long-run inflation. They use advanced computational methods to solve the model to second order, providing a more accurate approximation to welfare. The paper also compares the results with those from a cashless economy, highlighting the importance of considering realistic economic environments.This paper aims to compute optimal monetary and fiscal policy rules in a real business cycle model that includes sticky prices, a demand for money, taxation, and stochastic government consumption. The authors focus on simple policy rules where the nominal interest rate is set as a function of output and inflation, and taxes are set as a function of total government liabilities. The key findings are: 1. The size of the inflation coefficient in the interest-rate rule has a minor impact on welfare, except when it affects the determinacy of equilibrium. 2. Optimal monetary policy features a muted response to output, and interest rate rules with a positive response to output can lead to significant welfare losses. 3. The optimal fiscal policy is passive, but the welfare losses associated with an active fiscal stance are negligible. The authors relax several empirically unrealistic assumptions commonly made in the literature, such as the absence of capital accumulation, active fiscal policy, and zero long-run inflation. They use advanced computational methods to solve the model to second order, providing a more accurate approximation to welfare. The paper also compares the results with those from a cashless economy, highlighting the importance of considering realistic economic environments.