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.