Fiscal and Monetary Policy

The gross domestic product (GDP), or total value of all goods and services produced in the United States each year, now exceeds $15 trillion. While corporations play a huge part in the economy, the Federal Government also plays a part as it seeks to achieve full employment, price stability, and economic growth. Gross domestic product (GDP) is total amount of goods and services produced in a country each year.

Fiscal and Monetary Policy

A general increase in prices throughout the economy is inflation. A general decrease in prices is deflation. Both have negative effects on the economy. Economic growth occurs when the GDP is constantly growing. A recession occurs when there is an absence of growth and the economy shrinks.

Fiscal and Monetary Policy

The government tries to achieve its economic goals through its fiscal policy, or its power to tax and spend money. An increase in government expenditures usually leads to greater economic activity; spending cuts lessen that activity. Tax increases take money out of people’s pockets and can slow economic growth. Tax cuts boost economic activity.