Fiscal and Monetary Policy

What is fiscal policy?

Taxing and spending actions by Congress and the President to influence the economy

Who controls monetary policy?

the Federal Reserve

What two actions can Congress and the President take to end a recession?

1) Lower taxes 2) Increase government spending

What two actions can Congress and the President take to reduce inflation?

1) Raise taxes 2) Cut government spending

What power gives Congress and the President control over fiscal policy?

1) The Lawmaking power 2) Congress passes a bill, and the President signs it into law

What is a recession?

A downturn in the economy with high unemployment

Who controls fiscal policy?

Congress and the President

What is monetary policy?

Federal Reserve actions to influence the economy by regulating the money supply and the availability of credit

What determines the availability of credit?

Interest rates

What action can the Federal Reserve take to end a recession?

Lowers interest rates

What is inflation?

Prices go up and the value of the dollar goes down

What action can the Federal Reserve take to reduce inflation?

Raises interest rates

What power gives the Federal Reserve control over monetary policy?

The power to set interest rates