Introduction

Once you understand how to recognize a country in recession or inflation using AD and AS curves, you can now learn how the Federal Reserve and federal government attempt to rectify the nation's economy when it is not in equilibrium. This lesson will tie together the concepts that you have already learned on recessions, inflation, aggregate demand, aggregate supply, monetary policy and government taxing and spending.

 

 

 

 

Lesson Objectives

Following successful completion of this lesson, students will be able to:

  • use the AS/AD model to illustrate the effects of monetary policy on the economy.
  • use the AS/AD model to illustrate the effects of fiscal policy on the economy.
  • list and explain the tools of fiscal policy.

The above objectives correspond with the Alabama Course of Study: Economics objectives: 10.2, 10.3, 11, 11.1.

 

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