Economics Fiscal/Monetary Policy

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In 1932, President Hoover raised taxes.

Contractionary Fiscal Policy

In 1993, Clinton tax increase raised the top two income tax rates to 36% and 39.6%

Contractionary Fiscal Policy

The gov. increases the personal income tax, Social Security tax, and corporate income tax.

Contractionary Fiscal Policy

The gov. reduces the wages of its employees while raising taxes on consumers and businesses.

Contractionary Fiscal Policy

Banks reserve requirement is increased.

Contractionary Monetary Policy

During the Great Depression, the Federal Reserve bank DECREASED how much money was in circulation.

Contractionary Monetary Policy

In the early 1980s, the Federal Reserve Bank increased a key interest rate from 10% to 20%.

Contractionary Monetary Policy

The Federal Reserve sells securities.

Contractionary Monetary Policy

EX: Government spending increases while taxes remain the same.

Expansionary Fiscal Policy

EX: Recognizing that high tax rates were hindering the economy, President Kennedy proposed across the board tax rate reductions that reduced the top tax rate from more than 90% to 70%.

Expansionary Fiscal Policy

EX: The government cuts business and personal income taxes and increases its own spending.

Expansionary Fiscal Policy

In 2001 and 2003, Bush implemented tax cuts to stimulate the economy.

Expansionary Fiscal Policy

Banks reserve requirement is lowered.

Expansionary Monetary Policy

In 1992, due to a recession, the Federal Reserve Bank lowered the reserve requirement from 12% to 10%.

Expansionary Monetary Policy

In 2007, the Fed (Federal Reserve Bank) lowered the discount rate.

Expansionary Monetary Policy

The Federal Reserve buys securities.

Expansionary Monetary Policy

The day after Sept. 11, 2001 the Federal Reserve bank bought securities on the open market to provide liquidity to banks (to keep financial system stable).

Expansionary Monetary Policy

Expansionary Monetary policy

Reserve requirement and discount rate lower, Fed buys bonds

Contractionary Monetary policy

Reserve requirement and discount rate raise, Feds sell bonds

Monetary policy tools

Reserve requirement, discount rate, open market operations

Expansionary Fiscal policy

Taxes decrease, gov.spending increases

Contractionary Fiscal policy

Taxes increase, gov. spending decreases


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