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What is the purpose of the FED?
The Role of Government
Goods
Private Goods- (goods for personal use) examples:
soap and clothes
Public Goods-(goods for citizen’s use)
examples: public parks and highways
Government and Economy
Externality: Can have a + side effect or a – side effect
Monopoly: has no competition. Public services (gas,
electricity, water) are often natural monopolies
Antitrust laws to control monopoly power & promote
competition.
Mergers: 2 or more companies combine into 1 company.
Vertical Merger is companies that make related products
merge into 1 company. Horizontal Merger is companies
that make the same product merge into 1 company.
FTC or the Justice department will prevent some
mergers if they feel the merger will result in less
competition & higher prices.
Federal Regulatory Agencies police businesses to make
sure consumers are protected & businesses are
following the laws. (Example agencies: FCC, FDA, and
FTC)
Unemployment
Rate: % of
people not
working, but are
looking for jobs
GDP: Cost of
all goods &
services
produced in a
year.
Measuring the Economy
Inflation Rate: rise in the general
level of prices. It hurts the
economy because it reduces
purchasing power. Consumer
Price Index (CPI) is used to
keep track of inflation.
Real GDP: production of
all goods & services after
price increases have
been removed