Expansionary and Contractionary Policy

Expansionary Fiscal Policy

-Is used during recession Impact on PL and RGDP: Increase PL Increase RGDP

Expansionary Monetary Policy

-Used during recession

Contractionary Fiscal Policy

-Used to control inflation

Contractionary Monetary Policy

-Used to control inflation

Contractionary Fiscal Policy Impact on AD

Decrease AD

Contractionary Monetary Policy Impact on AD

Decrease AD

Expansionary Monetary Policy Impact on Interest Rates

Decrease Interest Rates

Contractionary Fiscal Policy Impact on Interest Rates

Decrease Interest Rates Budget Surplus

Contractionary Fiscal Policy Impact on PL and RGDP

Decrease PL Decrease RGDP

Contractionary Monetary Policy Impact on PL and RGDP

Decrease PL Decrease RGDP

Expansionary Monetary Policy Tools

Decrease RR Decrease DR Buy Bonds

Expansionary Fiscal Policy Tools

Government Action: Decrease Taxes Increase Gov. Spending

Expansionary Fiscal Policy Impact on AD

Impact on AD/SRAS: Increase AD

Expansionary Fiscal Policy Impact on PL and RGDP

Impact on PL and RGDP: Increase PL Increase RGDP

Expansionary Monetary Policy Impact on AD

Increase AD

Contractionary Monetary Policy Impact on Interest Rates

Increase Interest Rates

Expansionary Fiscal Policy Impact on Interest Rates

Increase Interest Rates Budget Deficit

Expansionary Monetary Policy Impact on PL and RGDP

Increase PL Increase RGDP

Contractionary Monetary Policy Tools

Increase RR Increase DR Sell Bonds

Contractionary Fiscal Policy Tools

Increase Taxes Decrease Gov. Spending