Effects of Monetary Policy

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7 Terms

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Easy Money Policy
A policy implemented by the Federal Reserve (FED) to lower interest rates and increase the money supply to stimulate economic growth.
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Tight Money Policy
A policy implemented by the Federal Reserve (FED) to raise interest rates and decrease the money supply to slow down economic growth.
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Inside Lags
The time it takes to formulate a policy, including the recognition lag and law-making lag.
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Recognition Lag
The time it takes to determine that a fiscal policy action is needed to address economic conditions.
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Law-making Lag
The time it takes for Congress to pass the laws necessary to adjust taxes and government spending as part of fiscal policy.
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Outside Lag
The time it takes to implement a policy and observe its effects, including the impact lag.
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Impact Lag
The time it takes from the passage of a tax or spending change to see its effect on the economy.