Fiscal Policy Acc.

How does the Government Stabilize the Economy. Choose 2.

• Fiscal Policy

• Taxes

• Monetary Policy

• Banking Policy

Actions by Congress to stabilize the economy.

• Fiscal Policy

• Monetary Policy

• Taxing Policy

• Inflation Policy

Actions by the Federal Reserve Bank to stabilize the economy

• Fiscal Policy

• Monetary Policy

• Taxing Policy

• Inflation Policy

Laws that reduce inflation, decrease GDP (Close an Inflationary Gap).

Decrease Government Spending.

Increase Taxes (Decreasing disposable income).

Combinations of the Two.

• Expansionary Fiscal Policy

• Contractionary Fiscal Policy

• Deficit Spending

• Inflation Policy

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap). 

Increase Government Spending.

Decrease Taxes (Increasing disposable income).

Combinations of the Two.

• Expansionary Fiscal Policy

• Contractionary Fiscal Policy

• Deficit Spending

• Inflation Policy

What is considered the Economic Brake?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Deficit Spending

• Deficit Policy

What is considered the Economic Gas Pedal?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Deficit Spending

• Deficit Policy

Deficit Spending:

• If the Government decreases spending without decreasing taxes they will decrease the annual deficit and the national debt.

• If the Government increases spending without increasing taxes they will increase the annual deficit and the national debt.