eluminate 3 - Determining National Output & Income What...

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What are the dominant theories of macroeconomics and how do they differ on major points of emphasis? Fiscal policy is the use of the federal government's powers of spending and taxation to stabilize the business cycle. If the economy is mired in a recession, then the appropriate fiscal policy is to increase spending or reduce taxes--termed expansionary policy. During periods of high inflation, the opposite actions are needed--contractionary policy. The consequences of fiscal policy are typically observed in terms of the federal deficit. Monetary policy is the Federal Reserve System's use of the money supply to stabilize the business cycle. As the nation's central bank, the Federal Reserve System determines the total amount of money circulating around the economy. In principle, the Fed can use three different "tools"--open market operations, the discount rate, and reserve requirements--to manipulate the money supply. In practice, however, the primary tool employed is open market operations. To counter a recession, the Fed
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This note was uploaded on 10/01/2011 for the course BIOLOGY 1510 taught by Professor --- during the Spring '11 term at Georgia State University, Atlanta.

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eluminate 3 - Determining National Output & Income What...

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