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Fiscal Policy v. Monetary Policy Unit 4 Review Fiscal Policy v. Monetary Policy

What are the two tools of fiscal policy? Gov’t spending & taxes

What is it called when you try to stabilize the economy by increasing the money supply? Expansionary or Easy money policy

What is it called when you try to stabilize the economy by decreasing the money supply? Contractionary or Tight money policy

Using fiscal policy how would you stabilize an the economy in a recession? Expansionary or Contractionary policy Expansionary

Using fiscal policy how would you implement expansionary policy? Increase gov’t spending & decrease taxes

Using fiscal policy how would you stabilize an the economy with high inflation? Expansionary or Contractionary policy Contractionary

Using fiscal policy how would you implement contractionary policy? Decrease gov’t spending & increase taxes

What are the three tools of monetary policy? Reserve Requirement Discount Rate Open Market Operations

Tight or easy money policy Easy money policy Using monetary policy how would you stimulate the economy if the GDP has been declining for two years? Tight or easy money policy Easy money policy

Using monetary policy how would you stop rapid inflation? Tight or easy money policy Tight money policy

How would you use monetary policy to implement easy money policy? Lower the reserve requirement Lower the discount rate Buy bonds/securities

How would you use monetary policy to implement tight money policy? Raise the reserve requirement Raise the discount rate Sell bonds/securities

What would cause high inflation? High employment rate Shortage of consumer goods Decrease in taxes Increase in gov’t spending Demand-pull Cost-push Excessive monetary growth

Who implements monetary policy? Federal Reserve

Who implements fiscal policy? Federal Gov’t