2008 Fiscal and Monetary Policy DBQ Student Response

a) Fiscal Policy refers to the budget and revenue, or taxing and spending.
b) The Executive Branch draws up and proposes a budget for each fiscal year, which is generally the basis for federal spending (though it is usually passed in altered form).
c) Congress ultimately controls fiscal policy; all bills for raising or appropriating money must go through it.
d) Monetary Policy is the amount of money in the market; it is used by the Fed to control interest rates.
e) One reason the Federal Reserve Board (or Fed) is given independence in monetary policy is to prevent political interference. For this reason the Chairman is given a 6-year term rather than changing with each new president. He or she is supposed to be a technocrat rather than a political appointee. Another reason for the Fed's independence is to allow for swift action. It's much easier for a small board to respond immediately to a problem than for a 535-member Congress.