Monetary Policy And Fiscal Policy

850 Words4 Pages
The Federal Government uses the monetary policy and fiscal policy to establish and determine the best way to manage the economy. Monetary policy is used by the Federal Reserve to manage the money supply. This includes credit, cash, check, and money market mutual funds, with loans, bonds, and mortgages being the most important. This policy can be broken into two categories: monetary restraint and monetary expansion. As it states, one is trying to restrain the market while the other expresses expanding the market. With control over the money supply, the two categories for monetary policy can manage the inflation of the economy. After this has been complete, the unemployment rate is a second objective that is handled and reduced. Fiscal policy is used as reference to the tax and spending policies, and is handled completely by the Federal Government rather than the independent agency of the Federal Reserve. In comparison to the monetary policy, there is also two sub categories of expansion and restriction. This paper will explain why I believe the monetary restraint policy is the best option for maintaining a stable economy through the use of controlled spending by limiting the access consumers have to money, its reliability in being the solution to a growing problem, and the benefits we see from past occasions. Using the monetary restraint policy will require the Federal Reserve to increase the interest rate nation-wide requiring citizens to decrease spending and borrowing.

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