Most recently the Federal Reserve, under chairmen Janet Yellen, has tapered its bond buying process to match current economic conditions with the demand for goods and services. The effect of purchasing bonds can be viewed as introducing currency into the economy, making capital more plentiful, and consequently lowering interest rates. The converse is also true when viewing the sale of treasury bonds. Unlike monetary policy which regulates a nation’s currency, fiscal policy regulates a nation’s expenditures and revenue. Both are useful tools in controlling economic conditions. In times of economic duress countries that actively regulate their economies are likely to spend large sums of money to artificially stimulate their economy. Most often this spending requires the government to run a budget deficit as tax revenue is heavily dependent upon economic conditions, however it should be viewed as an investment in future tax collection. The New Deal of the 1930’s and economic stimulus package of the late 2000’s are prime examples of Keynesian fiscal policy, where large sums of money were invested in the economy to spur growth and resolve
Most recently the Federal Reserve, under chairmen Janet Yellen, has tapered its bond buying process to match current economic conditions with the demand for goods and services. The effect of purchasing bonds can be viewed as introducing currency into the economy, making capital more plentiful, and consequently lowering interest rates. The converse is also true when viewing the sale of treasury bonds. Unlike monetary policy which regulates a nation’s currency, fiscal policy regulates a nation’s expenditures and revenue. Both are useful tools in controlling economic conditions. In times of economic duress countries that actively regulate their economies are likely to spend large sums of money to artificially stimulate their economy. Most often this spending requires the government to run a budget deficit as tax revenue is heavily dependent upon economic conditions, however it should be viewed as an investment in future tax collection. The New Deal of the 1930’s and economic stimulus package of the late 2000’s are prime examples of Keynesian fiscal policy, where large sums of money were invested in the economy to spur growth and resolve