Economic Concepts and Current Events The Federal Reserve, fiscal policy and comparative advantage are all macroeconomic theories and/or concepts that play a large role in our current economy. The Federal Reserve has a large impact on the banking system and how they create money to have a positive output where the fiscal policy takes a slower rate to get started (Amadeo, 2011) but once executed can be extremely productive. As long as the US has an absolute advantage in some industries and can produce at a lower opportunity cost then they can have a comparative advantage with other countries. The Federal Reserve was created to avoid a possible tragedy spun from a financial panic that could create a major depression. They are here to safeguard the financial system (Williams, 2012) which is exactly what they did in late 2008 when it seemed our economy was starting to fall apart. They were able to provide many bail outs for our financial institutions as well as backstopped the market that corporations use to get short-term funding to finance payrolls and inventories (Williams, 2012). These actions taken by the U.S. Treasury and Federal Reserve have succeeded in halting the financial panic and allowing us to avoid a depression. Although we are still in the midst of a recession, this is not to the fault of the Federal Reserve not doing their job but rather to the damage done by the housing bubble and a large financial crisis. Along with the current recession the government had to initiate a form of their fiscal policy to decide on either cutting taxes or increasing spending to help stimulate the economy (Amadeo, 2011). By cutting taxes this gives the consumers more money in their pockets to but in their checkable accounts which then adds more money to the banks reserves. This also frees up more money for the consumer to spend and allows more that the bank can lend