Use fiscal policy to solve a recession.
What does Congress need to do to aggregate demand?
What should Congress do to taxes to change the aggregate demand?
How will this change in taxes affect consumers’ disposable income?
How will this change in disposable income affect consumer spending in the economy?
What should Congress do to government spending to change the aggregate demand?
How will this change in aggregate demand affect firms’ employment of workers?
How will this change in employment affect consumers’ disposable income?
How will this change in disposable income affect consumer spending in the economy?
How will this change in spending affect economic growth and job creation?
Use monetary policy to solve a recession.
What does the Fed need to do to the money supply to change the aggregate demand?
What should the Fed do to bonds (open Market Operations) to change the money supply (buy or sell)?
How will this bond action affect the cash available for loan at banks?
How will this change in the money supply affect consumer interest rates?
How will this change in interest rates affect the amount of money borrowed?
How will this change in borrowing affect consumer spending in the economy?
What should the Fed do to the discount rate to change the money supply?
How will this discount rate change affect the willingness of banks to borrow from the Fed and make cash available for loan at banks?
How will this change in available cash affect consumer spending in the economy?
What should the Fed do to the reserve requirement to change the money supply?
How will this reserve requirement change affect the cash available for loan at banks?
How will this change in available cash affect consumer spending in the economy?
How will this change in spending affect growth and jobs?
Use fiscal policy to solve inflation.
What does Congress need to do to aggregate demand?
What should Congress do to taxes to change the aggregate demand?
How will this change in taxes affect consumers’ disposable income?
How will this change in disposable income affect consumer spending in the economy?
What should Congress do to government spending to change the aggregate demand?
How will this change in aggregate demand affect firms’ employment of workers?
How will this change in employment affect consumers’ disposable income?
How will this change in disposable income affect consumer spending in the economy?
How will this change in spending affect inflation?
Use monetary policy to solve inflation.
What does the Fed need to do to the money supply to change the aggregate demand?
What should the Fed do to bonds (open Market Operations) to change the money supply (buy or sell)?
How will this bond action affect the cash available for loan at banks?
How will this change in the money supply affect consumer interest rates?
How will this change in interest rates affect the amount of money borrowed?
How will this change in borrowing affect consumer spending in the economy?
What should the Fed do to the discount rate to change the money supply?
How will this discount rate change affect the willingness of banks to borrow from the Fed and make cash available for loan at banks?
How will this change in available cash affect consumer spending in the economy?
What should the Fed do to the reserve requirement to change the money supply?
How will this reserve requirement change affect the cash available for loan at banks?
How will this change in available cash affect consumer spending in the economy?
How should this change in spending affect inflation?