Ch 22: Fiscal & Monetary Policies

About This Chapter

Review the main components of fiscal and monetary policies in this chapter. Video lessons fully cover the associated topics. Test your understanding of lesson topics with brief quizzes.

Fiscal & Monetary Policies - Chapter Summary

This chapter explains what fiscal policy refers to and discusses the differences in intention between the use of contractionary fiscal policy and expansionary fiscal policy in managing the economy. The impact of fiscal policy on unemployment also is reviewed in this chapter. You will also see information presented on what a progressive tax code looks like and the effects of this kind of tax code. You will also cover the importance of timing in exercising fiscal and monetary policy tools. This chapter provides all the material needed to be comfortable with the following subject matter after your review is finished:

  • Define fiscal policy and fiscal policy tools
  • Provide examples of transfer payments
  • Explain how the progressive tax code works
  • Describe what automatic economic stabilizers are
  • Discuss what supply-side economics is and list supply-side policy examples
  • Identify the different types of policy lags
  • Detail Keynes' theory on short-term GDP and national debt

These video lessons include convenient tags that you can use to quickly jump between specific segments that you'd like to review further. Your comprehension of the material can be quickly gauged via the lessons' corresponding self-assessment quizzes.

13 Lessons in Chapter 22: Fiscal & Monetary Policies
Test your knowledge with a 30-question chapter practice test
Fiscal Policy: The Keynesian Revolution

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.

Fiscal Policy Tools: Government Spending and Taxes

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.

Expansionary Fiscal Policy and Aggregate Demand

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.

Contractionary Fiscal Policy and Aggregate Demand

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.

Fiscal Policy and the Effects on Unemployment

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.

Understanding the Progressive Tax Code

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.

Automatic Stabilizers in Economics: Definition & Examples

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.

Expansionary Monetary Policy: Helping the Economy Grow

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.

Contractionary Monetary Policy: Slowing the Economy Down

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.'

The Importance of Timing in Fiscal and Monetary Policy Decisions

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.

Supply-Side Economics in Fiscal and Monetary Policy

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.

Managing the Economy with Fiscal and Monetary Policies

12. 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.

Short-Term GDP and National Debt: Keynes' Theory

13. 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.

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
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Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
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