Download APGov_Ch18

Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Chapter 18: Making Economic
Policy
• An Introduction to
Economic Policy
• Fiscal Policy
• Monetary Policy
• Promoting the Economy
• Regulating the
Economy
• The Deregulation
Movement
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Chapter Outline and Learning
Objectives
An Introduction to Economic Policy
• LO 18.1 Describe the federal government’s economic
policy making role and how economic performance is
measured.
Fiscal Policy
• LO 18.2 Outline the way in which the federal
government makes fiscal policy and the role of fiscal
policy.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Chapter Outline and Learning
Objectives
Monetary Policy
• 18.3 Outline the way in which the federal government
makes monetary policy and the role of monetary
policy.
Promoting the Economy
• 18.4 Identify ways in which the federal government
seeks to promote economic growth.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Chapter Outline and Learning
Objectives
Regulating the Economy
• 18.5 Categorize ways in which the federal
government seeks to regulate the economy.
The Deregulation Movement
• 18.6 Evaluate the advantages and disadvantages of
the deregulation movement.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
LO 18.1
An Introduction to Economic Policy
LO 18.1 Describe the federal government’s
economic policy making role and how economic
performance is measured.
An Introduction to Economic Policy
• The framers did not concentrate economic policy in
any one branch.
• By creating a national government of limited powers
and providing constitutional guarantees to protect
property from excessive regulation, the framers
succeeded in protecting capitalism.
• We use two yardsticks to measure the performance
of the economy.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Fiscal Policy
LO 18.2
LO 18.2 Outline the way in which the federal
government makes fiscal policy and the role of
fiscal policy.
Fiscal Policy
• Where the Money Comes From
• Where the Money Goes
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Fiscal Policy
LO 18.2
Fiscal Policy (cont.)
• The Budget Process
• Tax Expenditures
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.2
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.2
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.2
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.2
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.2
Fiscal Policy
The Politics of Taxing and Spending
• Taxes promote economic growth and reward
certain types of behavior.
• As much as taxpayers complain about taxes
most taxpayers want more of virtually
everything the federal government provides.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Monetary Policy
LO 18.3
18.3 Outline the way in which the federal
government makes monetary policy and the role
of monetary policy.
Monetary Policy
•Monetary policy is the second way the federal
government manages the economy.
•Advocates of aggressive monetary policy
contend that the money supply is the key factor
affecting the economy’s performance.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.3
Monetary Policy
The Federal Reserve System
• Monetary policy is not made by Congress or
the president.
• The Fed has several basic tools for
influencing the economy.
• The rate goes up and down through decisions
by the Federal Reserve Board.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.3
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.3
Monetary Policy
Government and Economic Policy
• The Great Depression of the 1930s tested
competing theories about helping the
economy.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Promoting the Economy
LO 18.4
18.4 Identify ways in which the federal
government seeks to promote economic growth.
Promoting the Economy
• Promoting Economic Growth
• Promoting International Trade
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.4
Promoting the Economy
Promoting the Economy
• The World Trade Organization
• The North American Free Trade Agreement
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.5
Regulating the Economy
18.5 Categorize ways in which the federal
government seeks to regulate the economy.
Regulating the Economy
• Regulating Corporations
• Regulating Competition
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Regulating the Economy
LO 18.5
Regulating the Economy
• Regulating the Use of Labor
• Regulating Corporate Markets
• Protecting the Environment
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.5
Regulating the Economy
Corporate Responsibility
• Many corporations have been dealing with the
increased pressure to be more responsible.
• Corporate social responsibility: Efforts by
corporations to improve their reputations by
paying attention to their contributions to the
social good.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
The Deregulation Movement
LO 18.6
18.6 Evaluate the advantages and disadvantages
of the deregulation movement.
The Deregulation Movement
• Deregulation is a policy promoting cutbacks in
the amount of federal regulation in specific
areas of economic activity.
• During the past generation, airlines, trucking,
and railroads have been granted considerable
freedom in conducting their operations.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
The Deregulation Movement
LO 18.6
A Continued Federal Role
• Members of Congress and the president
understand that the federal government must
be active in the economic life of the nation.
• Citizens exert a great deal of influence on
economic policy.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Which of the following is NOT part of the
normal business cycle?
LO 18.1
A. Expansion, in which the economy produces
new jobs and growth
B. Contraction, as the economy starts to slow
down
C. Recession, in which the economy reaches a
trough of slow growth
D. Depression, an extremely deep form of
recession that lasts much longer than the
average recession
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Which of the following is NOT part of the
normal business cycle?
LO 18.1
A. Expansion, in which the economy produces
new jobs and growth
B. Contraction, as the economy starts to slow
down
C. Recession, in which the economy reaches a
trough of slow growth
D. Depression, an extremely deep form of
recession that lasts much longer than the
average recession
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
The greatest proportion of public spending
goes to ___________________.
A.
B.
C.
D.
LO 18.2
Human resources
Military expenditures
Interest on the debt
Foreign aid
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
The greatest proportion of public spending
goes to ___________________.
A.
B.
C.
D.
LO 18.2
Human resources
Military expenditures
Interest on the debt
Foreign aid
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Monetary policy is made by
___________________.
A.
B.
C.
D.
LO 18.3
president
Congress
Federal Reserve
courts
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Monetary policy is made by
___________________.
A.
B.
C.
D.
LO 18.3
president
Congress
Federal Reserve
courts
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.4
The ______has conducted eight rounds of
negotiations during the past six decades, all of
which have amended the General Agreement on
Tariffs and Trade (GATT) to encourage free trade.
A.
B.
C.
D.
North Atlantic Trade Association
World Trade Organization
European Common Market
Organization of the Petroleum Exporting
Countries
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
LO 18.4
The ______has conducted eight rounds of
negotiations during the past six decades, all of
which have amended the General Agreement on
Tariffs and Trade (GATT) to encourage free trade.
A.
B.
C.
D.
North Atlantic Trade Association
World Trade Organization
European Common Market
Organization of the Petroleum Exporting
Countries
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Which of the following helps to regulate
business activities that may create unfair
advantages?
LO 18.5
A. Regulating Corporations
B. Regulating Competition
C. Regulating the Use of Labor
D. Protecting the Environment
E. All of these
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Which of the following helps to regulate
business activities that may create unfair
advantages?
LO 18.5
A. Regulating Corporations
B. Regulating Competition
C. Regulating the Use of Labor
D. Protecting the Environment
E. All of these
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Deregulation has been greatest in which of
the following industries?
A.
B.
C.
D.
LO 18.6
Automobile
Oil and gas
Airline
Steel
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Deregulation has been greatest in which of
the following industries?
A.
B.
C.
D.
LO 18.6
Automobile
Oil and gas
Airline
Steel
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Back to learning objectives
Text Credits
•
•
482: From “Obama More Popular Abroad Than at Home, Global Image
of U.S. Continues to Benefit” July 2010, by Pew Global Attitudes
Project. Copyright (c) 2010 by Pew Global Attitudes Project, a project of
the Pew Research Center. Reprinted with permission.
493: From “Board Diversity” by Susan Williams in Investor
Responsibility Resource Center, Background Report A. Copyright (c)
2010 by Institutional Shareholder Services Inc. Reprinted with
permission.
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Photo Credits
•
•
•
•
•
•
•
•
•
•
•
•
•
478: UPI/Landov
481: (left) AP Photo
481: (right) Paul Sakuma/AP Photo
485: AFP/Getty Images
487: M. Spencer Green/AP Photo
488: Topham/The Image Works
489: (top) Jose Fuste Raga/Corbis
489: (bottom) Nicki Nikoni/Getty Images
490: Brian Lee/Corbis
491: Rick Wilking/Reuters/Landov
494: (top) Konrad Steffen/University of Colorado/Reuters/Landov
494: (bottom) Don Emmert/AFP/Newscom
496: Landon Nordeman/Getty Images
Copyright © 2011 Pearson Education, Inc. Publishing as Longman