Economics Fiscal/Monetary Policy
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
