The Fed can curb inflation by decreasing the money available and discouraging borrowing. It does this by cutting the money supply and raising interest rates. Discuss fiscal policy and its importance to the economy. For many years, federal expenses have been exceeding federal revenues-the result is an increasing federal debt. The money paid for interest on the debt is so high that it drains money from the economy.
Higher taxes lower the amount available for investment.
The government is spending more each year, even though the rate of growth in spending is slowing. Fiscal policy has a major influence of businesses. The national debt is so high because the government grew faster than the economy's ability to pay for it. We can't afford everything. For years, economic was defined as the allocation of scarce resources among competing groups and individuals.