Today’s Warm Up  Respond to the following quote in your notes and be ready to share: “Hindsight is 20/20.”

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Presentation transcript:

Today’s Warm Up  Respond to the following quote in your notes and be ready to share: “Hindsight is 20/20.”

Fiscal Policy & Monetary Policy Today’s LEQ: Could the Great Depression have been avoided?

The Business Cycle  Our economy fluctuates between periods of expansion (economic growth) and contraction (economic decline)  Now days, the government and the Federal Reserve play a larger role in maintaining economic stability – making sure the ups and downs aren’t too extreme. This wasn’t the case in the 1920s…

Fiscal Policy  Tools used by the gov’t to stabilize the economy:  Taxes  Government Spending

Expansionary Fiscal Policy  Used during period of contraction  Decrease taxes  Increase gov’t spending

Contractionary Fiscal Policy  Used during periods of expansion (expanding too fast can cause problems too!)  Increase taxes  Decrease gov’t spending

Monetary Policy  Tools used by the Fed to stabilize the economy  Money Supply  Credit Availability

Expansionary Monetary Policy  Used during periods of contraction  Increase money supply & credit availability  For example, decrease interest rates – make it “cheaper” to borrow money

Contractionary Monetary Policy  Used during periods of expansion  Decrease money supply & credit availability  For example, increase interest rates – make it more expensive to borrow money

Are You Picking Up What I’m Putting Down?!  It’s November 1929:  Where is the American economy on the business cycle?  What should the gov’t do?  What should the Fed do?

1929 vs  Summarize your assigned section  Scribe your summary on poster paper  Be ready to present in 15 minutes!  Be clear and precise! Remember, your classmates don’t have background knowledge on your section. You’re teaching them!

RAFT Assignment  Role: Economic Advisor  Audience: President Hoover, Congress, and the Chairman of the Federal Reserve  Format: Speech  Topic: Explain to President Hoover, Congress, and the Fed why their actions thus far have been counteractive in preventing a Great Depression. Convince them to follow your recommendations and be sure to discuss both fiscal policy and monetary policy.