Fiscal and Monetary Policies

Series 7 questions in this chapter test whether you can separate fiscal policy from monetary policy and then connect each policy tool to likely market effects. The exam does not stop at terminology. It expects you to reason from government spending, taxation, deficits, Federal Reserve actions, and liquidity conditions to rates, inflation, and securities prices.

This chapter starts with fiscal policy and then moves to the Federal Reserve, monetary-policy tools, and the way policy changes filter through the economy and the capital markets.

In this section

• Fiscal Policy
  Review government spending, taxation, and deficits and how fiscal choices affect growth, inflation, and securities markets.
• Monetary Policy
  Understand the Federal Reserve, policy tools, and the effect of monetary policy on rates, liquidity, inflation, and asset prices.