Download to read offline
More Related Content
Similar to Fiscal and-monetary-policy
Fiscal and-monetary-policy
- 1. Contractionary Fiscal PolicyContractionary Monetary Policy Expansionary Monetary PolicyExpansionary Fiscal Policy Monetary Policy ToolsFiscal Policy Tools Monetary PolicyFiscal Policy The spending and taxing policies used by Congress and the president Changes in government spending Tools used to stimulate the economy during a recession: Lowering taxes or increasing government spending. Tools used to stimulate the economy during a recession: Buying government securities. Lowering the reserve requirement. Lowering the discount rate. Lowering interest paid on required and excess reserves. Tools used to stabilize the economy in times of inflation: Selling government securities. Increasing reserve requirements. Increasing the discount rate. Increasing the interest paid on required and excess reserves. Tools used to stabilize the economy in times of inflation: Increasing taxes or lowering spending. The tools used by the Federal Open Market Committee to influence the availability of credit and the money supply WHO?WHO? Federal Open Market Committee 4–Rotating votes–district presidents 1–New York Fed President 7–Board of Governors 7–Nonvoting members Tax policy: Changes in tax rates and rules Congress $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Aggregate demand to right (increases)Shifts Results Consumer spending Business investment Tools Taxes Government spending Effects Real GDP Price level Employment Aggregate demand to right (increases)Shifts Results Tools BUY Government securities Reserve requirements Interest on reserves Discount rate Effects Real GDP Price level Employment Consumer spending Business investment Aggregate demand to left (decreases) ShiftsEffects Real GDP Price level Employment ResultsTools SELL govenment securities Reserve requirements Interest on reserves Discount rate Consumer spending Business investment Aggregate demand to left (decreases) Shifts ResultsTools Taxes Government spending Effects RGDP Price level Employment Consumer spending Business investment President Fiscal & Monetary Policy THE FEDERAL RESERVE BANK OF ATLANTA How do policymakers stabilize the economy? MACROECONOMICS Open market operations Reserve requirement $ $ 3% or 10% of demand deposits Interest on required and excess reserves Discount rate $ Reserves LoansInterest Interest FED Buy or sell BOND Influence and stabilize the economy. Promote price stability. Promote maximum sustainable employment. Fiscal and Monetary Policy Goals Recessionary gap Inflationary gap Potential Real GDP Contractionary policy Expansionary policy LRASPrice Level Real GDP SRAS IAD IPL IYRY RAD RPL PL AD Learn more about this topic and download a copy of this infographic by visiting frbatlanta.org/education/classroom-tools/infographicsConnect with the Atlanta Fed.