§ 01
| Tool | Expansionary (Stimulus) | Contractionary (Austerity) |
|---|---|---|
| Spending | Increase (infrastructure, defense, transfers) | Decrease (budget cuts) |
| Taxes | Cut taxes (more disposable income) | Raise taxes (reduce deficits) |
| Effect on GDP | Boosts growth short-term | Slows growth short-term |
| Effect on deficits | Increases deficit | Reduces deficit |
§ 02
Fiscal and monetary policy can work together or against each other. Stimulus spending with rate hikes creates a tug-of-war. Stimulus with rate cuts is rocket fuel for the economy.
§ 03
Check FRED data for the **federal deficit** and **government spending** trends. How is fiscal policy positioned right now?
§ 04
§ 05
The government cuts taxes AND raises spending simultaneously (expansionary fiscal policy) while the economy is already at full employment. What is the most likely consequence?
Five questions · AI feedback
Sit with the ideas.
Congress passes a $500 billion infrastructure bill during a period of low unemployment and 3% GDP growth. The Fed responds by raising rates. What is the most likely net effect on markets?
Why: