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Monetary v. Fiscal policy
Updated: 3/25/2020
Monetary v. Fiscal policy
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Storyboard Text

  • Isabella Herr
  • Of course I know lots about the economy, that's my major!
  • Hey, could you just tell me one difference between monetary and fiscal policy for a project real quick? 
  • Fiscal policy is conducted by the government and uses taxes and spending. While monetary policy is conducted by the federal reserve and uses discount rate, open market, and RRR
  • Okay thanks! That helps a--
  • Because right now, we are spending more money, so prices will come up. The tax code will decrease, leading to inflation, then it will eventually stabilize again. 
  • Um I just asked for one difference....
  • But right now, Texas economy is good. Like manufacturing and retail have gone up. Home sales have slowed down, and there has been a labor shortage however, inflation is to an estimated 1.7 percent in 2019.
  • Wait there's more! In an emergency response to the global outbreak of the COVID-19, the Federal Reserve's FOMC lowered the fed funds rate twice in March 2020. Texas banks are more likely to borrow from each other to meet their reserve requirements when rates are low. Credit card rates drop, so consumers shop more. With cheaper bank lending, businesses expand.
  • Yeah...I'm going to hang up now..
  • *call ended*
  • And this really contradicts the policies because inflation and recession is a never ending cycle! ...Hello? Are you still there?
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