1. Economic Policy Fiscal policy - Taxing, spending, and borrowing policies of the federal government. Monetary policy – directed by The Federal Reserve (The Fed); control the supply of money; set interest rates. Monetarism - the supply of money is the key to the nation's health, and having too much cash and credit in circulation stimulates inflation.

2. The Federal Reserve Chairman – Janet Yellen (4 Year Terms) – 14 Governors (14 Year Terms) appointed by the President; confirmed by the Senate. Chairman – Janet Yellen (4 Year Terms) – 14 Governors (14 Year Terms) appointed by the President; confirmed by the Senate. Independent Executive Agency with the power to: Independent Executive Agency with the power to: Set discount rates for the money that banks can borrow from the Federal Reserve. Set discount rates for the money that banks can borrow from the Federal Reserve. Set reserve requirements that determine the amount of money that banks must keep in reserve at all times. Set reserve requirements that determine the amount of money that banks must keep in reserve at all times. Buy and sell government securities in the market, thereby either expanding or contracting the money supply. Buy and sell government securities in the market, thereby either expanding or contracting the money supply. Ben Bernanke's Greatest Challenge - 60 Minutes - CBS News Ben Bernanke's Greatest Challenge - 60 Minutes - CBS News

3. Economic Review Terms budget deficit A situation in which the government spends more than it takes in, thus pumping more money into the economy. budget deficit A situation in which the government spends more than it takes in, thus pumping more money into the economy. budget surplus A situation in which the government takes in more money than it spends, thus draining money out of the economy. budget surplus A situation in which the government takes in more money than it spends, thus draining money out of the economy. budget resolution A total budget ceiling and a ceiling for each of several spending areas submitted by the Budget Committees in the House and Senate to their respective chambers. These resolutions serve as targets to guide the work of each legislative committee as it decides what should be spent in its area. budget resolution A total budget ceiling and a ceiling for each of several spending areas submitted by the Budget Committees in the House and Senate to their respective chambers. These resolutions serve as targets to guide the work of each legislative committee as it decides what should be spent in its area.

4. Economic Theory Keynesianism A liberal economic theory developed by English economist John Maynard Keynes, who believed that economic health depends on the proportions of income which are saved and spent. The government's task is to create the right level of demand. When demand is too low, the government should pump money into the economy through spending on its programs. When demand is too great, the government should take money out of the economy by increasing taxes or cutting spending.

5. Economic Theory supply-side theory A conservative economic theory that maintains that sharp tax cuts increase the incentive for people to work, save, and invest. The greater productivity of the economy stimulated by these increased investments would produce more revenue for the government despite the tax cut. Reaganomics The economic program advocated by economist Arthur Laffer and instituted by President Ronald Reagan in 1981 which combined the theories of monetarism, supply-side tax cuts, and domestic budget cutting. The goal was to reduce the size of the federal government, to stimulate economic growth, and to increase American military strength.

6. Economic Theory Monetarism. Monetarists such as Milton Friedman hold that inflation is the result of too much money chasing too few goods. This occurs when government prints too much money. When government tries to stop inflation by decreasing the money supply, unemployment increases. Rather than adopting these start-and-stop policies, it would be better if government allowed the money supply to increase steadily and consistently at a rate about equal to the growth in the productivity of the economy.

7. Iron Triangles “Revolving Door” What Drives Record Spending on Defense? : NPR What Drives Record Spending on Defense? : NPR What Drives Record Spending on Defense? : NPR

8. Factors that Drive Federal Spending Discretionary Spending – Defense, Education, Homeland Security, Agriculture, etc; interest groups keep this spending from getting cut. Mandatory Spending – Interest on the debt, Pensions, Social Security, Medicare; entitlements and other promises; also hard to cut.... To be continued.