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Government and the Economy Economic Goals, Policy and Effects Complete the InQuizitive exercises for Chapter 16 as you work through this outline. Economic Management • • Laissez faire – Economic management and infrastructure • Macroeconomic conditions and the individual The activist federal government – – – Government efficacy Public perceptions Market failures and public goods A definition of public goods is on page 644 in We the People. The following link has a definition of market failures: http://www.econlib.org/library/Topics/College/marketfailures.html How do these two relate to each other? Economic Policy What are the commonly held goals of economic management? Read pages 643-651 in We the People and to understand why each of these goals is a “good thing.” • Goals – – – – – – Economic growth – – GDP includes government purchases and net exports (GDP = C+I_G_NExports) US historical average is 3.5% Low unemployment Price stability Positive balance of payments Minimizing negative externalities Supporting key economic sectors How do fiscal policy and monetary policy differ, and who has responsibility over these (pages 660-669 in We the People)? • Tools – Fiscal policy – Monetary policy (The Federal Reserve Board) Read about the first three of the following perspectives on economic management in pages 652654 in We the People. A quick description of industrial policy awaits here: http://www.investorwords.com/17635/industrial_policy.html Be prepared to describe each perspective in a sentence or two. • • Perspectives – Keynesians – Monetarists – Supply siders – Industrial policy advocates Federal fiscal policy – Spending levels – Spending priorities What are the largest spending items in the federal budget (Figures 16.6 and 16.7 on pages 668669 in We the People)? Do any items seem missing? – Taxation Where does the federal government get the money to fund its budget (Figure 16.4 in We the People, page 663)? – The tax system – Budget deficits – The national debt • • Subsidizing business – Public ownership – Cash subsidies – Loan guarantees – Tax incentives Regulation – Explanations – History • Progressive era • New Deal era • New social regulation • Deregulation – • The future Who influences economic policy? – Governmental actors • The President • Congress • The Federal Reserve Board – Societal actors • Interest groups • Public opinion • Political parties How do unemployment and inflation affect society differently? Think of whom is affected, and how intensely. This article gives good perspective: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/12/which-makes-us-moremiserable-inflation-or-unemployment/
