Federal Monetary and Fiscal Policy

The management of the money supply and interest rates is what is known as monetary policy, The Federal Reserve System (the Fed) was established by an Act of Congress in 1913 and consists of the seven members of the Board of Governors in Washington, D.C., and twelve Federal Reserve District Banks. The Congress structured the Fed to be independent within the government-that is, although the Fed is accountable to the Congress, it is insulated from …

…or the likely public reaction to a particular course of action. Few governments will find it easy to raise taxes or to decrease funding for programs that have strong support from the public, such as social security or defense. The fiscal policy has a major influence on businesses and business people, employees and the entire economy will feel the effect eventually as the business people decides whether to hire more people and invest more money.