Policy and Control
The Monetary and Fiscal Policies, although controlled by two different organizations, are the ways that our economy is kept under control. ... The monetary policy is the act of regulating the money supply by the Federal Reserve Board of Governors, currently headed by Alan Greenspan. ... This is used to control overall money supply. ... Because it is easier to make gradual changes in the supply of money, open market operations are use more regularly than monetary policy. ... Just like other loans, there is an interest rate, or a discount rate, the third tool of the monetary policy. ... The monetary policy is a good way to influence the money supply, but it does have its weaknesses. One weakness is that tight money policy works better that loose money policy. Tight money works on bringing money in to stop circulation, but for loose policy to really work, people have to want loans and want to spend money. ... The second way to influence the money supply lies in the hands of the government with the Fiscal Policy. The fiscal policy consists of two main tools. ... The main point of fiscal policy is to keep the surplus/deficit swings in the economy to a minimum by reducing inflation and recession.