1. Warm Up See Ms. Nall for handout

2. Fiscal & Monetary Policy

3. What is the purpose of Fiscal and Monetary Polices? To ensure economic expansions and contractions are not too severe NOT

4. Which economist is in favor of fiscal and monetary policy?

5. Purpose of Fiscal and Monetary Policy

6. Fiscal Policy Congress tries to fix the problems of inflation and unemployment

7. Economic Problem: Unemployment Occurs when the market slows down due to a lack of consumer spending. So… the Goal is to INCREASE the amount of $ in the hands of consumers

8. Fiscal Policy (Congress) Taxes Gov’t Spending Welfare (transfer) payments Expansionary Fiscal Policy

9. Economic Problem: Inflation Occurs when the market is flooded with too much money in the hands of consumers So… the Goal is to DECREASE the amount of $ in the hands of consumers

10. Fiscal Policy (Congress) Taxes Gov’t Spending Welfare (transfer) payments Contractionary Fiscal Policy

11. Monetary Policy Federal Reserve tries to fix the problems of inflation and unemployment

12. The Federal Reserve System – (the bank’s bank)

13. Federal Reserve Vocab Discount (Interest) Rates: The cost of borrowing money Reserve Ratio: The % of your money banks cannot lend out Bonds: Investments (stocks) in the Gov’t

14. Economic Problem: Inflation Occurs when the market is flooded with too much money in the hands of consumers So… the Goal is to DECREASE the amount of $ in the hands of consumers

15. Monetary Policy (Federal Reserve) Discount (Interest) Rates Reserve Ratio Sell Bonds TIGHT Monetary Policy

16. Economic Problem: Unemployment Occurs when the market slows down due to a lack of consumer spending. So… the Goal is to INCREASE the amount of $ in the hands of consumers

17. Monetary Policy (Federal Reserve) Discount (Interest) Rates Reserve Ratio Buy Bonds LOOSE Monetary Policy

19. Rust/Frost Belt- people are leaving this area Sun Belt- people moving to this area for jobs Silicon Valley- center of technology research Research Triangle- research center with many colleges

20. Declining textile and furniture Companies have out-sourced jobs to China and Mexico and downsized (shrunk).

21. Practice Understanding Fiscal and Monetary Policy

22. Closure How does the Federal Reserve use monetary policy to ensure balance and stability in the US economy? What role does government spending play in maintaining a stable and solid economy?