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Fiscal Policy
To where does the money
ripple?
John Maynard Keynes, father of ‘deficit
spending’
You are Congress. Your job is to
analyze part of Obama’s stimulus
proposal. Your group will be given a
list of stimulus spending. Groups are
to evaluate the effectiveness of the
items, choosing three that are
effective and three that are not. Use
the economic ripple effect to evaluate
it: Does the item create a farreaching, effective economic ripple
effect, or is it a waste of money?
The Federal Reserve Bank
Former Fed Chairman Ben Bernanke
New Chairman Janet Yellen
The Fed monitors the economy in each of
these areas, then acts to regulate the
nation’s economy as a whole.
The Fed determines the amount of
money in circulation, and also shreds
nasty old money
The Fed clears all checks
Most importantly, the Fed loans money to
banks, and therefore sets the national
interest rate.
Great! Credit cards are
swiping again. But what
problem could arise now that
people are shopping and
buying more?
Paul Volcker, recession of
1982
What will the Fed do to
interest rates in each of the
following situations?
1. For the 6th straight month, the
unemployment rate increases, now standing at
10.5%.
2. The CPI is showing an inflation rate of 7%
annually.
3. For the 3rd quarter in a row, GDP growth is
at 0%.
4. We are at full employment, and businesses
are having a hard time finding workers.
5. New home construction has shown its 6th
straight month of decline.
6. GDP growth is at a record pace, averaging
8% for the past nine months.
7. Consumer spending shows 7th straight
month of increase.
Franklin Roosevelt’s New
Deal (1933-1938)
Name the President who created the first
massive government sponsored stimulus
package, give me the name of his overall
program, and give me the decade in which
it took place.