About This Chapter
Fiscal and Monetary Policies
What are fiscal and monetary policies? Do you know how policy decisions made by government officials can affect the economy? You may not be aware of the exact definition of 'fiscal and monetary policy,' but chances are good that you hear about it a lot. If you have opinions on how the government should approach the economy, such as having a viewpoint on taxes, you're already thinking about fiscal policy. Wouldn't it be great to learn more?
As election cycles heat up, you might hear some politicians or pundits described as 'Keynesians.' What does this mean? Well, in these lessons, you'll hear about the theories of John Maynard Keynes, an economist whose work has had a great impact on economic policy. In addition to learning about Keynesian economic theory, you'll get an introduction to fiscal policy, including how fiscal policy impacts something called 'aggregate demand.'
These lessons explore governmental moves that can impact unemployment or help the economy grow. You'll also learn how, on the flip side, monetary policy can slow down the economy. Watching these videos on fiscal and monetary policies might not help you get excited about election season, but it should help you take a more informed approach to the democratic process.
Well-informed instructors lead these lessons and helped develop the brief, multiple-choice quizzes that are included. They will allow you to measure your understanding of fiscal and monetary policies.
1. Fiscal Policy: The Keynesian Revolution
In this lesson, you'll learn how the government uses stabilization policy to smooth out the ups and downs of the business cycles. In stark opposition to the Classical approach, this Keynesian approach favors taking immediate action to stabilize a troubled economy.
2. Fiscal Policy Tools: Government Spending and Taxes
Discover the three main tools the government uses to address recessionary and inflationary economies - what economists call fiscal policy. Find out how these tools are used to help the economy in different situations.
3. Expansionary Fiscal Policy and Aggregate Demand
In the 21st century, the realities of a recessionary economy are more vivid than many of us would probably like. In this lesson, you'll learn how the government uses expansionary policy to offset recessionary gaps using real-world examples.
4. Contractionary Fiscal Policy and Aggregate Demand
This lesson examines how fiscal authorities use contractionary fiscal policy to slow down the economy and defeat the enemy called inflation. Find out what fiscal tools the federal authorities can use to contract the economy.
5. Fiscal Policy and the Effects on Unemployment
Review what fiscal policy is and how the two key components of fiscal policy can be used to influence unemployment. Find out when and how fiscal policy can be used and why it is so important.
6. Understanding the Progressive Tax Code
In this lesson, learn what a progressive tax code is, how to recognize it, and what the alternatives are. Then, learn the differences between the three tax codes: progressive, regressive and proportional. Finally, learn how sales tax would impact progressivity.
7. Automatic Stabilizers in Economics: Definition & Examples
Watch this lesson to learn about the features that are built into the tax code and the government's budget that help offset declines in aggregate demand during recessions. Referred to as automatic stabilizers, they also address the needs of individuals facing hard times.
8. Expansionary Monetary Policy: Helping the Economy Grow
In this lesson, you'll learn how the central bank helps the economy grow during recessions by increasing the size of the money supply. An overview of the three tools of monetary policy are included as well as the reasons why monetary policy leads to higher economic output.
9. Contractionary Monetary Policy: Slowing the Economy Down
In this lesson, you'll find out more about the central bank's efforts to deal with an overheating economy, what economists call 'contractionary monetary policy.'
10. The Importance of Timing in Fiscal and Monetary Policy Decisions
In this lesson, discover four different types of policy lags that occur when fiscal and monetary authorities take action in attempt to influence economic output. Find out which policy has less of a time lag.
11. Supply-Side Economics in Fiscal and Monetary Policy
This lesson explains what supply-side economics is, where it started, and how economists illustrate it. It provides a basic overview of the still-controversial theory that was popularized by President Ronald Reagan during the 1980s.
12. Short-Term GDP and National Debt: Keynes' Theory
Discover the tension fiscal authorities face between the two equally rewarding goals of reducing the national debt and maintaining a growing economy in the short term. This lesson explains the tension from the Keynesian point of view.
13. What is a Contractionary Gap? - Identifying an Economy That is Below Potential
In this lesson, you'll discover what a contractionary gap is with a real world example. In addition, you'll learn how economists illustrate it, so you can easily recognize it.
14. Calculating the Size of a Contractionary Gap
Sometimes the economy's actual production is below its potential, and in this lesson, you'll learn how to calculate the gap between the two, something economists call 'a contractionary gap.'
15. What is an Expansionary Gap? - Identifying an Economy That is Above Potential
In this lesson, you'll find out what an expansionary gap is, how economists illustrate it, and how to easily identify an economy that is growing above its long-run potential. In addition, you'll discover the unintended consequence that comes with expansionary gaps.
16. Calculating the Size of an Expansionary Gap
This lesson will teach you how to estimate the size of an expansionary gap by calculating the difference between actual economic output and potential economic output. The task of knowing the size of an expansionary gap is critical for economists and government leaders who want to attempt to eliminate it so they can help smooth out the business cycle.
17. Managing the Economy with Fiscal and Monetary Policies
Learn what fiscal and monetary policy are and how they are used to manage the economy. Find out the goals of these policies and some of the tools that each use to help you find a job and influence the amount of money in your pocket.
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Other chapters within the Economics 102: Macroeconomics course
- Scarcity, Choice, and the Production Possibilities Curve
- Comparative Advantage, Specialization and Exchange
- Demand, Supply and Market Equilibrium
- Measuring the Economy
- Inflation Measurement and Adjustment
- Understanding Unemployment
- Aggregate Demand and Supply
- Macroeconomic Equilibrium
- Inflation and Unemployment
- Economic Growth and Productivity
- Money, Banking and Financial Markets
- Central Bank and the Money Supply
- Foreign Exchange and the Balance of Payments
- Inflows, Outflows, and Restrictions
- Studying for Economics 102