Introduction
Since the mid-20th century, U.S. policymakers have attempted to
use a mixture of monetary policies and fiscal policies to promote
the twin goals of full employment and price stability. Monetary
policies are those affecting the availability of credit, the
supply of money and the velocity of its circulation, while fiscal
policies are the government's spending and taxing policies. By
the late 1960s, economists were using the term "fine tuning" to
indicate the level of dexterity they believed they had achieved
in controlling the economy to support the nation's principal
economic objectives. But the capacity to "fine tune" the economy
proved to be an illusion. Inflation rose into the double-digits
in the 1970s, and although inflation was brought under control
early in the 1980s, federal budget deficits soared. So, how are
monetary and fiscal policies used in the United States? What
costs and benefits do they offer?
