How does the government control the economy?

A viewer asked this question on 5/15/2000:

Could you explain how the U.S. government controls the economy through fiscal and monetary policy. Also I can't find any key players, institutions- and individuals who play a role in controlling the economy. I really need help. I need the answer by tonight.

JesseGordon gave this response on 5/15/2000:

By tonight? Hmm....

The key player is Alan Greenspan. Look him up on any search engine and you'll get your entire project done. He's the Chairman of the Federal Reserve, the institution that sets interest rates. He decides (along with the rest of the Federal Reserve Board) whether to raise or lower interest rates on government loans, Treasury notes, and other things which determine the interest rate, ultimately, for everything else. That's one of the key means of controlling the economy these days.

The Fed also controls "the money supply," which means the amount of dollars in circulation. They don't use that much as a means of controlling the economy these days (look up "monetarists" if you want to know hte theory on that -- basically, the amount of dollars in circulation determines the inflation rate). Some other countries still do, but we stick to interest rates these days.

A good start?

JesseGordon gave this follow-up answer on 5/15/2000:

Oops, forgot to add a URL:
which contains some more on Greenspan & The Fed; some links to background documents, and links to what the presidential candidates think about controlling the economy.

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