Monetary Policy and Fiscal Policy

Monetary policy

Controlling the supply of money and credit to influence the economy

The Fed (Federal Reserve)

Central bank of the U.S.; the banks bank; conducts monetary policy

Discount rate

Interest rate that The Fed charges banks to loan them money

Reserve requirement

Banks must keep a certain percentage of their money in the vaults or on deposit with The Fed

The Fed sells securities

To take money out of circulation (contractionary)

Expansionary monetary policy

A policy which increases the supply of money

Contractionary monetary policy

A policy that decreases the supply of money

Fiscal policy

The president and Congress (the government) uses the federal budget to shape the economy; to get economy going (spending or reduce taxes) or slow it down (increase taxes)

Revenue

Income for government from taxes

Income Tax

Tax on a person's or corporation's income; largest share of federal government revenue

16th Amendment

Established that federal government could collect an income tax

Tariffs

Taxes on imported goods

Bonds/Savings Bonds

A financial instrument by which a borrower agrees to pay back borrowed money, plus interest, at a future date; a person may buy a $50 bond based on the promise of getting $100 back at some later date

Regulation

Legislation imposed to regulate or modify economic behaviors

Deregulation

Getting rid of regulatory laws