Introduction to the Macroeconomic Perspective

Policy Tools

National governments have two tools for influencing the macroeconomy. The first is monetary policy, which involves managing the money supply and interest rates. The second is fiscal policy, which involves changes in government spending/purchases and taxes.

We will explain each of the items in Figure in detail in one or more other chapters. As you learn these things, you will discover that the goals and the policy tools are in the news almost every day.