Shelbi Hale

Econ1010
Eportfolio Essay
Fiscal and Monetary policy
Chapters 12&14
Fiscal policy is the use of government taxes and spending to alter
macroeconomic outcomes. A big part of fiscal policy is aggregate demand.
The four major components of aggregate demand are consumption,
investment, government spending, and next exports. (Essentials of
economics, chapter 12, page 247). Consumption, the first of the four major
components, is simple household needs and wants, such as groceries.
Investment, the second of the four major components, is business spending
on things like equipment. Government spending, the thirds of the four major
components, government spending, Net Exports, the final component of the
major components, is exports, but minus imports.
Monetary policy is the use of money and credit controls to influence
macroeconomic activity (Essentials of Economics, chapter 14, page 285). The
tools for monetary policy are: reserve requirements, discount rates, and open
market operations. Reserve requirements are the minimum amount of
reserves a bank is required to hold by government regulations. Discount rate
is the rate pf interest charged by Federal Reserve banks for lending reserves
to a private bank. Open market operation is the Federal Reserve purchases
and sales of government bonds for the purpose of altering bank reserves.
I believe the fiscal and monetary policy affect many lives. It is all about
understanding how fiscal policy and monetary policy drive the performance
of the market, which includes interest rates with borrowed money, ability to
obtain credit, unemployment and employed rates, whistleblowers claims and
many more trickle effects from mishandling any of these policies. I have
seen how these policies impact people that I have been close to. I am
beginning the adventure in adulthood and am realizing that these policies
will make a difference and impact goals that I may have set for me,
personally. Fiscal policy decreases unemployment and cuts taxes, but
increases government spending. Increasing government spend does not
always feel as though it is the most logical approach to resolving an issue
that is ongoing with the economica climate. Increasing government spend,
decreasing taxes and decreasing unemployment must have a logical
approach and be more of a long term solution rather than what seems to be
a continuous instant reaction of gratification.
Resources:
Schiller, B. (2014). Chapter 12 Fiscal Policy. In Essentials of Economics (Ninth ed.,
pp. 246-265). McGaw Hill.
Schiller, B. (2014). Chapter 14 Monetary Policy. In Essentials of Economics (Ninth
ed., pp. 284-301). McGaw Hill.