Government and the U.S. Economy
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59 terms
Terms | Definitions |
|---|---|
 The U.S. Economy and Government | Eventhough the economy relies heavely on free enterprise our government plays an important role in the operation of the economy; Goods and services count for more than 1/3rd of our nation's Grose Domestic Product |
| Public Sector | another turm referred to as our government |
| Privite Sector | another turm referred to as businesses |
| Role of Government in Our Economy According to Classical Economists (Hint 3 things) | ~believe the government's role in the economy should be limited ~regard Supply and Demand as the most powerful and potentially benificial part of economic forces ~the best thing government can do for the economy is to keep its hand off and allow the markets to clear on their own |
| General view of Government Role According to Republicans | believe in the power of big businesses, thus urge the government's role in the lives of citizens to be as small as possible |
| General view of Government Role According to Democrats | believe government should be heavily involved in various economic issues |
| Other Economists Views on Governmental Role | like Paul Samuelson, believe too many problems that occur in the marketplace should be the laws of demand rather than external costs and it is up to the government to solve their own mistakes/problems |
| Examples of Minimal Wages | ~many Democrats endorses the use of minimum wage laws to help low-income workers ~Classical Economists say such laws harm the very people they are intended to help --By increasing labor costs, minimum wage laws make it too expensive for many firms to hire as many low wage workers --As a result, those who might otherwise be employed are not hired at all |
| Samuelson's (Democratic) View on Poverty | argue government-sponsored programs such as public housing and food stamps to reduce poverty |
| Classical Economist's View on Poverty | advocate taxing low-income families far less so they can keep more money earned |
| What do you think? | Should the government be run like a business that searches for the most efficient outcomes or should it strive to help as many people as it possible can? |
| Government's Roles in the U.S. (AMP it up!) | 1) Arbiter 2) Manager 3) Participant |
| Arbiter | Establishing and enforcing private property rights describes this government role in the U.S. economy. Protecting consumers describes this role of the US government. |
| External Costs | "Spillover Costs" Ex: Boat Cleaning Shop whose chemicals kill the fish of a seaside community |
| External Benefits | Public education, public parks, medical clinic who treat people against communicable diseases (a shot) |
| Functions of Government as an Arbiter | 1) Ensure market Competition 2) The Sherman Antitrust Act of 1890 3) Protect Consumers |
| Market Competition | When competition is restricted and consumers have fewer choices which cause producers to feel pressured to reduce costs and eliminate inefficiencies |
| The Sherman Antitrust Act of 1890 | made it illegal to create a monopoly, enter into a conspiracy to create a monopoly, or "restrain trade" |
| Protect Consumers | Government has been taken action to protect consumers from faulty products and deceptive advertising |
| Particapant | providing goods and services |
| Ben Bernaky | Chairman of the federal government |
| Regressive Tax | Social Security Tax |
| Todays National Debt | 15.7 |
| Money Supply | Total amount of money in circulation at any given time |
| Classical Economists are Often Referred to as | Republicans |
| NOT an Example of M2 Money | Foreign;large saving currency |
| Income Tax | Single large source of funding for federal government |
| ... | Single largest source of funding for blank... |
| The Four Referee Roles the Federal Government Fulfills in the Economy | 1) to enforce private property rights 2) to moniter external costs and benefits 3) to ensure market competition 4) to protect consumers |
| Social Security and Taxes | what the federal government does to manage the economy |
| The Two Principles of Taxation | 1) the benefits-recived principle 2) the ability to pay principle |
| Proportional Tax | tax which the percentage of income paid in taxes is the same for all income levels |
| Progressive Tax | taxes a higher proportion of income from higher income |
| Regressive Tax | a tax for which the percentage of income paid in taxes decreases as income increases |
| Justifications and Criticisms of Federal Deficits and the National Debt | 1) Annual Intrest payment on the national debt have been a large, growing portion of the federal budget 2) Largeportion of the federal budget 3) Deficits may reduce private investment 4)Deficits may trigger inflation |
| Services Banks and Financial Institutions Provide | 1) Banks supply the economy with cash 2) Process checks and electronic transfers 3) Hould Reserves for Depository Institution 4) Serve as Banker to the Federal Government 5) Supervise and Regulate Banking Institutions 6) Regulate the Money Supply |
| How Banks Create Money | They cannot lend all the money entrusted to them because depositors have the rights to withdraw funds at any time; however expearience has shown deposits are greater than withdrawals |
| Roles and Responsabilities of Federal Reserve | 1) issuing parer currency collecting and clearing checks 2) holding the banking system's regulating the money supply 3) along with other agencies supervising and regulating the nation's banking institutions |
| The Value of Money | There are two types of inflation: demand--pull and cost--push. Demand--pull inflation is when rising prices cause too much money "to chase" too few goods. Cosh-Push inflation is when rising prices result from increase in the cost of production caused by the increase of raw materials, the wage-price spiral. Inflation affects people differently; some suffer, others benefit. Those most likely to suffer are people living on relatively fixed incomes, savers, lenders, and businesses. |
| manager | Stabilizing the economy describes this governmental role in the US economy. Promoting economic security describes this governmental role. |
| participant | Providing goods and services describes this governmental role. |
| the republican party | political party generally considered in favor of big business most like classical economists |
| progressive tax | type of tax that takes a larger percentage of higher incomes and a smaller percentage of a lower incomes |
| regressive tax | Security tax considered to be this type of tax |
| property taxes | the single-largest source of funding for local governments |
| sales tax | the single-largest source of funding for state governments |
| personal income tax | the single-largest source of funding for the federal government |
| benefit payments | federal government spends most of its money on this |
| 15.7 trillion | Approximately today's national debt |
| checking accounts | the largest component of the money supply |
| portability, uniformity, or divisibility | why bowling balls would not be acceptable currency |
| foreign currency; large savings accounts | not an example of M2 money |
| money supply | the total amount of money in circulation at any given time in a country |
| goldsmiths | Our current banking system was actually started by these professionals |
| the fractional reserve system | our type of banking system where banks withhold a portion of their depositors' money and loan out the rest |
| district reserve banks | 12 |
| 7 members and a chairman | board of governors is comprised of this many board members and one of these |
| Ben Bernanke | the current chairman of the Fed |
| voting rights, and paid,fixed dividends | the two main differences between preferred and common stock |
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