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Federal Reserve

Federal Reserve. Monetary Policy- The Fed’s power over interest rates and amount of $ in reserve Fiscal Policy- The Government power over taxes and spending. Contractionary Policy (Tight $$) – during inflation 1. Increase interest rates

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Federal Reserve

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  1. Federal Reserve

  2. Monetary Policy- • The Fed’s power over interest rates and amount of $ in reserve • Fiscal Policy- • The Government power over taxes and spending

  3. Contractionary Policy (Tight $$) – during inflation • 1. Increase interest rates • 2. Increase reserve requirement ($$ banks must have in reserve) • 3. Increase taxes • 4. Decrease government spending

  4. Expansionary Policy (Easy or Loose $$) – during recession/depression • 1. decrease interest rate (easy to buy) • 2. decrease taxes • 3. decrease reserve requirements (banks have more $$ to loan) • 4. increase government spending

  5. Progressive Tax- • The higher one’s income the higher the percentage of tax (ex. Income tax) • Regressive Tax- • Tax imposed at a flat rate (ex. Sales tax) • Excise – tax on manufacture, sale, and consumption of goods; often called “hidden tax” (ex. Tax on fuel, alcohol, tobacco

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