The Federal Reserve Fiscal Policy - Using taxes and spending to help the economy grow. Monetary Policy - Policy that involves changing the rate.

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Until Great Depression, government did little to influence economy persistent unemployment, low production changed many economists minds John Maynard.

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Presentation transcript:

The Federal Reserve

Fiscal Policy - Using taxes and spending to help the economy grow. Monetary Policy - Policy that involves changing the rate of growth of the money supply in circulation in order to affect the cost and availability of credit.

John Maynard Keynes - Economic Theory Believed: a. There is a circular flow of money in a normal economy. b. For various reasons, the flow may be interrupted. c. The Federal Reserve System should increase the money supply to get it started again. d. In the case of severe recession, the government should start spending.