1. Monetary and Fiscal Policy

2. How do we promote Economic Growth? Fiscal Policy: Actions done by the government to increase GDP and stabilize inflation Monetary Policy: Actions done by the Federal Reserve to increase GDP and stabilize inflation Ben Bernake is the Chairman

3. So what does this all mean? Bottom Left Corner. Top Box. Expansionary Policy: What to do when the GDP Slows Down or Decreases. Bottom Left Corner. Bottom Box. Contractionary Policy: What to do when inflation grows too quickly

4. How does the Government do it? Left Box under Fiscal Policy Discretionary Policy: Taxing and spending that requires a vote by Congress. Follow the arrow Expansionary Policy: Increase government spending or lower taxes. Contractionary Policy: Decrease government spending or raise taxes.

5. How does the Government do it? Fiscal Policy Right Box Automatic Stabilizers: Programs established by congress that benefit people if they qualify. Welfare, Public Assistant, Medicaid. Follow the Arrow Expansionary Policy: Increase Automatic Stabilizers. Contractionary Policy: Decrease Automatic Stabalizers

6. How does the Fed do it? (Left Box) Reserve Requirement: Money that banks are required to keep on hand when they loan out your deposits. Expansionary Policy: Lower the Reserve Requirement. Contractionary Policy: Raise the Reserve Requirement.

7. How does the Fed do it? (Middle Box) Discount Rate: The interest rate the Fed charges its member banks. All other interest rates in the economy are set off this. Expansionary Policy: Lower the Discount Rate Contractionary Policy: Raise the Discount Rate

8. How does the Fed do it? (Right Box) Open Market Operations: The buying and selling of Treasury Bonds. Expansionary Policy: Buy Bonds Contractionary Policy: Sell Bonds