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The Complete Idiot's Guide to Economics, 2nd Edition by Tom Gorman

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Monetary Policy in Action

In general, a policy acts as a framework for the appropriate action to take in a given situation. The government’s economic policies aim to maintain a stable, growing economy with low inflation and unemployment. We’ve examined the fiscal policy actions that work toward those ends. In a sluggish economy, fiscal policy calls for a decrease in taxes or an increase in government spending, or both. In an overheated economy, fiscal policy calls for an increase in taxes or a decrease in spending, or both.
In a sluggish economy, monetary policy calls for an increase in the growth of the money supply, which occurs when the Fed targets a lower federal funds rate, buys securities through its open market operations, lowers the ...

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