Fiscal and Monetary Policy AIR Review

fiscal policy

government policy that attempts to manage the economy by controlling taxing and spending

contractionary fiscal policies

fiscal policies, like lower spending and higher taxes, that reduce economic growth (People lose or have to give government through higher taxes more of their own money and spend less)

expansionary fiscal policies

fiscal policies, like higher spending and tax cuts, that encourage economic growth (People get or keep more of their own money and can spend more)

inflation

an increase in the overall level of prices in the economy

monetary policy

a form of financial regulation through the Federal Reserve in which the nation's money supply and interest rates are controlled

Federal Reserve System

the central banking authority of the United States, which manages the nation's money supply. The bank for banks

open market operations

the buying and selling of government securities (Bonds) to increase or decrease the supply of money available to banks and the public

reserve requirement

a regulatory policy that requires banks to keep a certain portion of their deposits on reserve and not use it to make loans.

discount rate

the interest rate on the loans that the Federal Reserve makes to banks

Monetary Policy economic expansion

Lower the reserve Requirement, Buy Bonds from Banks, Lower interest rates(All of these make money more available for use and easier to get for loans, credit cards...)

Monetary Policy slowing of the economy(contraction)

raise Reserve Requirement, Sell Bonds back to Banks, Raise Interest rates (All of these make money less available for use and harder to get for loans, credit cards...)

Government Regulation

A law or rule that controls the way that a business can operate, or all of these laws considered together which can help or harm a business

Recession

a period of economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

US Government

Controls Fiscal Policy decisions

Federal Reserve

Controls Monetary Policy