Fiscal & Monetary Policy

Fiscal Policy

the use of government spending and revenue collection to influence the economy

Congress

part of the government responsible for fiscal policy

Monetary Policy

Government policy that attempts to manage the economy by controlling the money supply

Federal Reserve System

The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money

Expansionary Policy

government policy meant to stimulate economic growth

Contractionary Policy

government policy meant to slow the economy down

Increasing Taxes

Contractionary Fiscal Policy

Decreasing Taxes

Expansionary Fiscal Policy

Increasing Spending

Expansionary Fiscal Policy

Decreasing Spending

Contractionary Fiscal Policy

The Discount Rate

rate the Federal Reserve charges for loans to commercial banks

Increasing the Discount Rate

Contractionary Monetary Policy

Decreasing the Discount Rate

Expansionary Monetary Policy

open market operations

the purchase and sale of U.S. government bonds by the Fed

Federal Reserve selling bonds

Contractionary Monetary Policy

Federal Reserve buying bonds

Expansionary Monetary Policy

The Reserve Requirement

How much money banks must keep in their vaults

Increasing the reserve requirement

Contractionary Monetary Policy

Decreasing the reserve requirement

Expansionary Monetary Policy

interest rate

The amount of money that banks can charge in exchange for a loan.

Inflation

increase in prices and decrease in value of money

Increasing interest rates

Contractionary Monetary Policy

Decreasing interest rates

Expansionary Monetary Policy