Fiscal and monetary policy

Fiscal and Monetary Policy

Topic 12, Lesson 2

Fiscal and Monetary Policy

The gross domestic product (GDP), or total value of all goods and services produced in the United States each year, now exceeds $15 trillion. While corporations play a huge part in the economy, the Federal Government also plays a part as it seeks to achieve full employment, price stability, and economic growth. Gross domestic product (GDP) is total amount of goods and services produced in a country each year.

Fiscal and Monetary Policy

A general increase in prices throughout the economy is inflation. A general decrease in prices is deflation. Both have negative effects on the economy. Economic growth occurs when the GDP is constantly growing. A recession occurs when there is an absence of growth and the economy shrinks.

Fiscal and Monetary Policy

The government tries to achieve its economic goals through its fiscal policy, or its power to tax and spend money. An increase in government expenditures usually leads to greater economic activity; spending cuts lessen that activity. Tax increases take money out of people’s pockets and can slow economic growth. Tax cuts boost economic activity.

Multiple Choice

What is inflation?

• general increase in prices throughout one sector of the economy

• general decrease in prices throughout the economy

• general increase in prices throughout the economy

• general decrease in prices throughout one sector of the economy

Multiple Choice

A recession is the presence of economic growth

• TRUE

• FALSE

Multiple Choice

What is fiscal policy?

• opportunities for politicians to collect funds for their campaigns

• various means the government uses to raise and spend money

• methods tax payers use to pay less taxes

• policy set by individuals to make a budget for managing their personal finances