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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