Post on 12-Jan-2016
Today’
s W
arm
Up Respond to the
following quote in your
notes and be ready to
share: “Hindsight is
20/20.”
Fiscal Policy &
Monetary Policy
Today’s LEQ: Could the Great
Depression have been
avoided?
The B
usi
ness
C
ycle
Our economy fluctuates
between periods of expansion (economic
growth) and contraction
(economic decline) Now days, the government
and the Federal Reserve
play a larger role in maintaining economic
stability – making sure
the ups and downs aren’t
too extreme. This wasn’t
the case in the 1920s…
Fisc
al P
olic
y
Tools used by the gov’t to stabilize the economy:TaxesGovernment Spending
Exp
ansi
onary
Fi
scal P
olic
y Used during period of contractionDecrease taxes Increase gov’t spending
Contr
act
ionary
Fi
scal P
olic
y
Used during periods of expansion (expanding too fast
can cause problems too!) Increase taxesDecrease gov’t spending
Moneta
ry P
olic
y Tools used by the Fed to stabilize the economyMoney SupplyCredit Availability
Exp
ansi
onary
M
oneta
ry P
olic
y
Used during periods of contraction Increase money supply
& credit availability For example, decrease interest rates – make it “cheaper” to borrow
money
Contr
act
ionary
M
oneta
ry P
olic
y
Used during periods of expansion Decrease money supply
& credit availability For example, increase
interest rates – make
it more expensive to
borrow money
Are
You P
icki
ng U
p
What
I’m
Putt
ing
Dow
n?!
It’s November 1929:Where is the American economy
on the business cycle? What should the
gov’t do?What should the Fed do?
1929 v
s. 1
987
Summarize your assigned section
Scribe your summary on
poster paperBe ready to present in
15 minutes! Be clear and precise!
Remember, your classmates don’t have
background knowledge
on your section. You’re teaching them!
RA
FT A
ssig
nm
ent
Role: Economic Advisor
Audience: President Hoover,
Congress, and the Chairman
of the Federal Reserve
Format: Speech Topic: Explain to President
Hoover, Congress, and the
Fed why their actions thus far
have been counteractive in
preventing a Great Depression. Convince them
to follow your recommendations and be sure
to discuss both fiscal policy
and monetary policy.