Digging Deep in Economic Policy

Making an economic policy that provides service and is sustainable is a complicated process.  Economic Policy is comprised of two "teams".  The first "team" is fiscal policy and is headed up by Congress and the President and the second "team" is monetary policy that is controled by the Federal Reserve Board, the Fed.  I am going to try to break it down some to make economic policy a little less complicated.

Fiscal Policy stimulates the economy by running a budget deficit and takes money out by budget surplus, which discourages investments and consumption.  Governments "income" comes from taxes.  Government spending, is the government spending our taxes, providing police, Social Security, and State Welfare.  Taxes are confusing and often seen as unfair.  Everyone seems to have their own opinion on what would be the best way to tax.  Fiscal policy is decided by Congress and the President in efforts to try to stabilize the economy and help it grow.  Fiscal policy is how government decides it is going to spend our taxes to have the most effective influence on our  economy.

Monetary policy influences the economy by adjusting interest rates.  By the Fed setting the interest rates higher, it tends to slow down spending because everything is now more expensive.  When interest rates are low, spending increases, it is easier and more affordable to invest and to borrow money from banks.  The ability to influence interest rates helps the government react to inflation and recessions and impliment actions to correct the economy.  Monetary policy also controls the amount of money in circulation.  Bonds can be bought and sold to increase or decrease the money supply as well as printing more money. 

"Policymakers use fiscal and monetary policies to create a predictable environment of stable prices and high employment levels, so that economic actors can plan with some certainty about the future" (p. 309).  As with everything in government, economic policy is complicated and complex.  It is never perfect, but it has been built with room to change when changes are needed.  It has to be pretty intimidating to be in charge of a whole countries economy.  Not sure that I would want to do that job!  Would you?  Because economic policy is complicated and complex, it is the backbone to keeping our economy stable and providing service to the nation.  Do you believe that the economic process that our counrty uses works?  Do you have ideas that would make it better or smoother?  Do you know of another countries economic process that works better?  Would love some feed back on this one, I really would enjoy knowing more about this topic!

"Government always finds a need for whatever money it gets."
     Ronald Reagan~40th President (1981-1989)