Economics Fundamentals — The two big levers governments and central banks use to steer the economy.
Governments and central banks have two big levers to steer the economy: fiscal policy and monetary policy.
Fiscal policy: Government use of spending and taxes to influence the economy. Run by the government.
Monetary policy: A central bank managing interest rates and the money supply. Run by a central bank like the Federal Reserve.
To cool high inflation, a central bank usually raises interest rates to slow borrowing and spending. To fight a recession, governments may spend more or cut taxes to boost demand.
A deficit is the yearly shortfall when spending tops revenue. The national debt is the running total of past deficits.
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