Policy Mix

Concepts

  • Mix of Monetary and Fiscal Policy to Achieve Economic Goals
  • Expansionary Policy Mix (Stimulate Economic Activity to Combat Recession)
    • Monetary Policy (Increase Money Supply, Decreases Interest Rates)
      • Buy Bonds
      • Decrease Discount Rate
      • Decrease Reserve Requirement
    • Fiscal Policy (Increase Budget Deficit, Increases Interest Rates)
      • Increase Gov’t Spending
      • Decrease Taxes
  • Contractionary Policy Mix (Slow Down Economic Activity to Combat Inflation)
    • Monetary Policy (Decrease Money Supply, Increases Interest Rates)
      • Sell Bonds
      • Increase Discount Rate
      • Increase Reserve Requirment
    • Fiscal Policy (Decrease Budget Deficit, Decreases Interest Rates)
      • Decrease Gov’t Spending
      • Increase Taxes
  • Monetary Policy is More Efficient/Powerful than Fiscal Policy
  • Different Policy Tools Take Differing Amounts of Time to Create Economic Impact
  • Review How Interest Rate Changes Affect Investment (Business Spending)

Overview

Policy mix deals with combining monetary and fiscal policy to achieve specific economic goals. Whether it’s fighting inflation, getting out of a recession, or any other economic goal; a combination of monetary and fiscal policy can help the economy get there.  At this point, we’ve learned everything we need to know about monetary and fiscal policy.  In this lesson, we learn how to take this knowledge of monetary and fiscal policy and bring it all together to understand policy mix.

Materials

Lecture

Video Coming at Later Date

Quiz

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