Part 1: Managing Money - Fiscal Policy vs Monetary Policy

In its role as the main money manager of the economy, the federal government uses two processes known as monetary policy (interest rates, money supply) and fiscal policy (taxes, gov't spending). Check the process used in each of the following situations. What is the impact on the economy (expands/contracts)?

	Fiscal Policy	Monetary Policy	Impact
1. A party leader promises to increase funding for social programs without raising taxes
2. The Bank of Canada (BOC) tightens the money supply to help reduce inflation.
3. The budgets of government programs are reduced.
4. The BOC lowers interest rates

Part 2: Monetary Policy

The BOC tightens and loosens the money supply in its attempt to maintain a stable economy. Check whether the BOC would be likely to tighten or loosen the money supply in each of the following situations:

	Tighten Money Supply	Loosen Money Supply
1. Most areas of the country have high unemployment rates
2. The inflation rate is high.
3. Productivity has declined.
4. There is a low level of investment.
5. There is a high level of consumer borrowing.

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