Module 1 CASE
Course Number: ECO 202
Fiscal policy means direct spending. Such as congressional budgets from taxes or deficit spending. Monetary policy is managed by a central bank. They usually can do two things; influence the interest rate at which they loan money to banks and open market operations. With market operations they either create currency by issuing bonds or destroy it by purchasing. Generally the U.S. creates tons of money every day in the form of T-Bills also known as treasury bills but they also retire quite a few. In a recession the Fed cuts interest rates to stimulate borrowing and they increase fiscal spending to stimulate aggregate demand. They can also cut taxes like the rebate they're issuing.
Expansionary policies are fiscal policies, like higher spending and tax cuts that encourage economic growth. In turn, an expansionary monetary policy is monetary policy that seeks to increase the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry. Contractionary monetary policy is monetary policy that seeks to reduce the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry.
Keynes identified the catalyst of economic downturns, recessions and depressions, in changes in the investment policies of the boards of directors of capitalist firms. Without a doubt, Keynes argued that it was precisely the volatility of investment spending, or the demand for investment goods (capital goods and inventory), that created the so-called business cycle. And this volatility resulted from the uncertainties faced by these boards of directors when they attempted to maximize corporate profits: the members of the board are necessarily operating in an environment of uncertainty about future revenues and future costs and form expectations about these variables based on a wide range of factors out of their...