1. Monetary Policy vs. Fiscal Policy
Make it simple:
What can government do to help me spend money and grow the economy or how can government restrict my money and prevent me from spending to fight inflation.

2. Fiscal Deals with Congress What Tools Do They Have?
Congress uses Fiscal Policy: A deliberate use of taxes and spending to affect aggregate demand.
Expansionary Policy- Encourage Spending by putting money in your pocket! Can do this by lowering taxes and investing in government projects. This will drive up prices.
Contractionary Policy/Restrictive- Discourage Spending by taking money out of your pocket.
They will raise taxes and decrease spending to control spending and inflation.

3. How the Government Increases Spending
Entitlement Programs: WIC (Women, Infants, and Children), SNAP (food stamps), Social Security, Welfare
Increase in Defense Spending
Spend money on projects (Space Program)
Stimulus Program (Roads and other Civil Engineering projects)

4. Monetary Policy is the FED
Change the reserve requirement of funds banks must keep on hand
Federal Funds Market of how much banks charge each other to borrow money to make their reserve requirement
Discount Rate- What the Fed charges banks to borrow money to make reserve requirements
(The cost of All three are passed on to you in the interest rates you must pay on credit cards and loans)

5. Monetary Policy of the Fed Another Important Tool
Buying and selling of Government Securities
Take money out of the economy: sell securities/This also lowers Fed Funds rate for banks
Put money back in: Buy securities/Raises Fed Funds for banks
This is known as OPEN MARKET OPERATIONS

6. Simply
Tight Money is when the Fed Raises the Reserve Requirement, Fed Fund Rate, and Discount Rate and Open market operations of selling securities
Easy Money- Lowering the Reserve Requirement, Fed Fund Rate, Discount Rate, and Open Market Operations of buying securities. (Lower Rates encourage loans to consumers and spending)