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U.S. Economy > Monetary & Fiscal Policy
Introduction | Basic Conditions and Resources | Small Business
Foreign Trade | Monetary and Fiscal Policy | The Stock Market
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What kind of information materials are available?
CD: Texts available on CD version.Texts available in multiple languages.
A pyramid of symbolized financial institutions

· The Annual Budget Process CD
· An Analysis of the President's Budgetary Proposals for Fiscal Year 2008
· Budget of the United States Government Fiscal Year 2008/ Table of Content
Department of the Treasury
· Federal Reserve Board
The Federal Reserve System: Structure and Functions  CD
· Internal Revenue Service
Outline of the U.S. Economy: Monetary and Fiscal Policy CD
Outline of the U.S. Economy: The Role of Government in the Economy CD
· U.S. Central Bank Benefits Self-Regulating Economy
· U.S. Government Uses Tax Policy to Shape Economy

Original Documents
Economic Report of the President 2008 | Credit and Housing Markets| Tax Policy

· Statistical Abstract 2008: Prices, Banking, Finance, and Insurance, Federal Government Finances and Employment 

For High School Students
· Facts about the U.S. Mint
· Factmonster: A Brief History of U.S. Banking
· Factmonster: Money

· Treasury's Page for Kids

Teacher Resources
· The Bank Teller
· Banks, Bankers, Banking
· No Funny Money, Honey....I Want the Real Thing!
· Teaching Basic Banking Principles

Link Lists
Dollars and Cents: Fundamental Facts about U.S. Money
Forbes Financial Glossary
Guide to the National Banking System


The role of government in the American economy extends far beyond its activities as a regulator of specific industries. The government also manages the overall pace of economic activity, seeking to maintain high levels of employment and stable prices. It has two main tools for achieving these objectives: fiscal policy, through which it determines the appropriate level of taxes and spending; and monetary policy, through which it manages the supply of money. The Federal Reserve, the independent U.S. central bank, manages the money supply and use of credit (monetary policy), while the president and Congress adjust federal spending and taxes (fiscal policy).

Since the inflation of the 1970s, Federal Reserve monetary policy has emphasized preventing rapid escalation of general price levels. When the general price level is rising too fast, the Federal Reserve acts to slow economic expansion by reducing the money supply, thus raising short-term interest rates. When the economy is slowing down too fast, or contracting, the Federal Reserve increases the money supply, thus lowering short-term interest rates. The most common way it effects these changes in interest rates, called open-market operations, is by buying and selling government securities among a small group of major banks and bond dealers. A particularly tricky situation for monetary policy makers, called stagflation, occurs when the economy is slowing down and inflation is rising too fast.

In 2006 real wages rose 1.7 Percent. This means an extra $1,030 for the typical family of four with two wage earners. Real median household income in the United States climbed between 2005 and 2006, reaching $48,200. The wage growth translates into an extra $585 for the average full-time worker and an extra $1,030 in 2006 for a typical family of four with two workers. The President's Tax Relief enabled more than 5 Million taxpayers, including 4 Million taxpayers with children, to have their income tax liability completely eliminated in 2006.  As a result of the President's tax relief, a family with two children now begins to pay income taxes when their income reaches $41,867.  Without tax relief, the same family would have begun to pay income taxes when their income reached $33,070.  The President's Tax Relief is helping Americans keep more of what they earn. 

Texts are abridged from U.S. State Department IIP publications and other U.S. government materials.
Any reference obtained from this server to a specific commercial product, process, or service does not constitute or imply an endorsement by the United States Government of the product, process, or service, or its producer or provider. The views and opinions expressed in any referenced document do not necessarily state or reflect those of the United States Government.
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Updated:July 2008