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Chapter 20 reflection

This chapter talks about how the government's fiscal policy influences aggregate supply and aggregate demand regarding the money supply.

The Fed sets the interest rate, and when they make a change it impacts the opportunity cost people face when deciding whether to spend or save money. This in turn affects how much money is supplied and demanded within the economy.

The government can make choices about the purchases it makes or taxes it imposes, and this in turn affects many people's paychecks. Overall, it influences people's consumer spending.

Pessimism and optimism can cause people to change their demand for money, and on a large scale certain repeated actions can trigger a recession or inflation. Both the Fed and the government use their policies to attempt to stabilize these fluctuations.

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