Monetary and Fiscal Policy

Introduction and Alignment

The Federal Reserve uses various tools to change the money supply and interest rates. The policies of the Federal Reserve are initiated and monitored by the Federal Open Market Committee. Fiscal policies are initiated and monitored by the federal government. Fiscal policies can include a reduction or increase in government spending and taxes.

Upon completion of this assignment, you should be able to:

• Apply the aggregate expenditure model in business decision making.
• Explain the relationship between aggregate demand and aggregate supply.
• Evaluate how shifts in aggregate supply and demand curves affect business decisions.
• Explain the importance of monetary policy, fiscal policy, and interest rates on business decision making.
• Incorporate biblical and ethical principles into economic theory and practice.

Resources

• Bible
• Website: BibleStudyTools.com
• Textbook: Economics for Managers
• File: Project Description

Background Information

Money and monetary policy both impact the economy. Clearly, money affects the banking system and the role of the Federal Reserve in implementing monetary policy. Changes in interest rates affect managerial decisions because they influence the firm’s cost of borrowing and they change consumer spending patterns. Fiscal policy is implemented by the federal government, which also affects consumers and businesses in terms of government spending and tax policies.

Instructions

1. Before you begin this assignment, read Chapters 13 and 14 in Economics for Managers.
2. Find an article in the Wall Street Journal or other business publications that describes changes in fiscal and monetary policies in the United States.
3. Use the BibleStudyTools website (http://www.biblestudytools.com), your Bible, and other Internet sources to discover what the Bible says about monetary fiscal policy.
4. Navigate to the threaded discussion and respond to the following:
   1. Discuss how both the fiscal and monetary policies in the United States and in the Bible relate to the model of aggregate demand and aggregate supply and the issues involved in implementing the policies.
5. Your initial post is due by the end of the fourth day of the workshop.
6. Read and respond to at least two of your classmates’ postings, as well as all instructor follow-up questions directed to you, by the end of the workshop.
7. Your postings should also:
   1. Be well developed by providing clear answers with evidence of critical thinking.
   2. Add greater depth to the discussion by introducing new ideas.
   3. Provide clarification to classmates’ questions and provide insight into the discussion.
   4. Respond to the following:
      1. Discuss how both the fiscal and monetary policies in the United States and in the Bible relate to the model of aggregate demand and aggregate supply and the issues involved in implementing the policies.