Fiscal and Monetary Policy Smith

Fiscal and Monetary Policy Smith

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  • What if the opposite happened with a Monetary policy; which in this case would be a Tight Money policy. I wouldn't be able to take out as much on a loan as I want because in a Tight  Money policy Federal Reserve can increase interest rates which will make me pay back more in a shorter amount of time.
  • The way this Tight Money Policy works is a bit like this.
  • The FED can also raise interest rates by either increasing the rates on lending money to banks.
  • The Federal Reserve (FED) is in control of the whole Monetary policy. The FED can do one of three things or all three.
  • Or they can raise the amount of money banks must keep in the reserve or not lend out.
  • The FED can sell government bonds back to the government which gives the government less to spend.
  • I just got this place and now I hardly have enough to pay this off to the bank to make a profit because of these new interest rates. It's getting to the point that I have to start laying off some of my chefs and waiters.  
  • I just got laid off and the only reason I got was because it was costing her too much to keep us employed so she couldn't make a profit. What am I to do now the rent is due next month and the places i've looked at said they can't bring on anymore staff.
  • The bank said they are going to take away my tractor because they fear I won't be able to make the payments. Knowing that it will take so much longer for me to tend to my crops and the less crops i'm able grow the less money I will make.
  • Doing this isn't easy at times. It sucks because now that the FED took some of our money away now we have to cut back on lending loans. 
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