1. FISCAL & MONETARY POLICIES Controls the amount of money circulating in the economy.

2. FISCAL POLICY zRefers to the federal government’s taxing and spending decisions. zGovernment may lower taxes to stimulate spending

3. MONETARY POLICY zRefers to the Federal Reserve Board actions on the supply of money and credit.

4. MONETARY POLICIES zReserve requirements - amount of money banks must hold in reserve. zDiscount Rate - the rate banks pay to borrow from the Fed. zOpen Market Operations - buying and selling government securities in the market.

5. Recession zOccurs when there is not enough money circulating in the system. zToo many goods

6. INFLATION z Occurs when too much money is available too fast. z Too many dollars chasing too few goods

7. Regulate Inflation zRaise taxes zReduce spending z Slows the economy z Reduces demand

8. Regulate Recession zLower taxes zIncrease spending z Increases growth z Stimulates expansion