Alright,guys. Today we are going to learn about different policies: fiscal and monetary. Fiscal policy has to do with the government changing tax rates and spending in order to influence aggregate demand. while monetary policy is changing the interest rate to influence money supply. Now, what do you know that the government has done that has impacted the economy?
Oh and an example would be...a tax code is a federal government doc that #s thousands of pages that lists the rules for individuals/businesses to follow in giving up a % of their incomes to the federal government and sometimes state government. How drastically they update the tax code will determine it's impact for better or worse.
Government spending doesn't have an immediate affect on economy growth. However,when the government increases spending, it causes a tax burden on the citizens that leads to a decease in private spending/investment (the term for this scenario is called "crowding out".
Do y'all know what actions, if any, has the Fed taken regarding federal funds rate?
Alright, so with being said, the Texas economy was stable at the beginning of 2019 BUT inflation wasn't as high as the objective.....there was still a low 3.5% unemployment rate with a 2% payroll expansion
Good good. Now I know at least some of yall pay attention in class.
FOMC wanted to maintain the target rate of the federal funds rate to be 2.25% and 2.5% by having maximum employment rate and 2% inflation
And by maintaining max employment and the inflation, it would help rise and stabilize Texas economy to the 2%
Well fiscal policy has direct impact on the good markets while monetary policy has direct impact on the asset markets. because these two markets go hand in hand, the policies interact by influencing output and interest rates, meaning they’re meant to compliment each other
Hey do you know if the fiscal and monetary policies contradict or support each other and can you explain?