The Federal Government has two ways in which they can help to support economic growth. Monetary and Fiscal Policy. Monetary policy is the method that the government utilizes to lend money to banks and stimulate economic growth. Monetary policy is directed primarily by the Federal Reserve and chairman Ben Bernanke. The most common association with monetary policy is when the Federal Reserve raises or lowers the fed funds rate, commonly referred to as the prime rate. Recently the government has raised awareness of an additional way in which they can directly effect the marketplace and that is through fiscal policy. The much discussed economic stimulus package that would include tax rebates for almost everyone and tax credits for business is a great example of fiscal policy. Combining these two policies to help direct the economy out of its present down cycle is welcome news for home owners who have seen the value of their properties decline as much as twenty five percent over the last two to three years. Keep a close eye on inflation and job growth as the leading indicators of the next moves pertaining to monetary and fiscal policy changes.

 

1-26-2008©LowRateMortgage.com

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