FRtR > Outlines > American Economy (1991) > Monetary and Fiscal Policy > Introduction

An Outline of the American Economy (1991)


7/12 Monetary and Fiscal Policy


1/7 Introduction

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Since the mid-20th century, U.S. policymakers have attempted to use a mixture of monetary policies and fiscal policies to promote the twin goals of full employment and price stability. Monetary policies are those affecting the availability of credit, the supply of money and the velocity of its circulation, while fiscal policies are the government's spending and taxing policies. By the late 1960s, economists were using the term "fine tuning" to indicate the level of dexterity they believed they had achieved in controlling the economy to support the nation's principal economic objectives. But the capacity to "fine tune" the economy proved to be an illusion. Inflation rose into the double-digits in the 1970s, and although inflation was brought under control early in the 1980s, federal budget deficits soared. So, how are monetary and fiscal policies used in the United States? What costs and benefits do they offer?

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