Fiscal and monetary policy are used to manage the market economy. Monetary policy refers to the control of interest rates and money supply to influence the amount of money in circulation and thus affect the demand for products and services. The economic way of thinking refers to a system for making decisions. Since economics deals with choices about the use of limited resources for unlimited wants, decision-making is the central skill of economics. Economic decision-making is a logical, reasoned approach using economic concepts and generalizations.
Economic decisions involve six steps.
Clearly identify the details of the decision situation. Identify all the alternatives. 4. Consider each alternative and its consequences. Review and evaluate the decision. Decisions about the use of productive resources seldom become mutually exclusive.