1. Comparing Fiscal Policy and Monetary Policy

2. Who Operates It? Fiscal Policy –President –Congress –Elected officials –Legislation Monetary Policy –Federal Reserve System –Open Market Committee –7 Board of Governors Ben Bernanke - chair 14 year term Presidential Appointment –12 Regional Presidents Hired by FED

3. How Does It Work? Fiscal Policy –Changes Spending –Changes Taxes Monetary Policy –Money Supply Open Market Operations –Interest Rates Discount Rate –Reserve Requirements % deposit banks must hold –Open Mouth Operations Speeches by FED officials

4. What is it Best At? Fiscal Policy –Contractions –Recessions automatic –Depressions or Special Targets discretionary Monetary Policy –Inflation fighting –Quick Decisions –Inflation fighting –Ben Bernanke –Open Mouth Operations –Inflation fighting

5. Limitations of: Fiscal Policy –Political Process –Time Lags –Multiplier is 2x (in the real world) –Cyclical Asymmetry –Monetary Policy Monetary Policy –Secret Process –No Political Concerns –Cyclical Asymmetry –Fiscal Policy