American Government Unit VII Assessment

Chapter 15

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15-2

Government as Regulator

of the Economy  Efficiency through government intervention

 Promoting competition

 Making business pay for indirect costs

 Deregulation and underregulation

 Equity through government intervention

 The politics of regulatory policy

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15-3© 2013, McGraw-Hill Education. All Rights Reserved.

15-4

Government as Protector

of the Environment  Conservationism: the older wave

 Environmentalism: the newer wave

 Environmental protection

 Global warming and energy policy

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15-5© 2013, McGraw-Hill Education. All Rights Reserved.

15-6

Government as Promoter

of Economic Interests  Promoting business

 Government promotion of business

 Government-provided loans

 Special tax breaks

 Traditional services: education, transportation, and defense

 Tax burden has shifted from business to individuals

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15-7

Government as Promoter

of Economic Interests  Promoting labor

 National Labor Relations Act of 1935

 Minimum wage

 Maximum work week

 Unemployment benefits

 Nondiscriminatory hiring practices

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15-8

Government as Promoter

of Economic Interests  Promoting agriculture

 Homestead Act of 1862

 Farm programs to eliminate some farming risk

 Federal payments account for more than a fourth of net

agricultural income

 American farmers among the most heavily subsidized in

the world

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15-9

Fiscal Policy as an Economic Tool  Demand-side policy

 Emphasizes the consumer (demand) component of the

supply–demand equation.

 Government spending to alleviate economic depression or

recession

 Generally preferred by Democratic lawmakers

 Can result in budget deficit/increased national debt

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15-10

Fiscal Policy as an Economic Tool  Supply-side policy

 Emphasizes the business (supply) component of the

supply–demand equation

 Tax breaks for firms and upper-income individuals intended

to encourage business investment with resulting increases in

employment and income

 Generally preferred by Republican lawmakers

 Can result in budget deficit/increased national debt

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15-11

Fiscal Policy as an Economic Tool  Fiscal policy: practical and political limits

 Demand-side or supply-side work most effectively with

smaller government and balanced budgets

 Republican and Democratic lawmakers are miles apart on

how best to deal with recessionary periods

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15-12© 2013, McGraw-Hill Education. All Rights Reserved.

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15-15

Monetary Policy as an

Economic Tool  The Fed

 Control over money supply

 Raise/lower the cash reserve required of member banks

 Raise/lower interest rate on member banks

 Fighting an economic downturn

 Decreasing interest rate on loans to member banks

 Lowering reserve rate

 Buying government securities (bonds, notes, etc.)

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15-16© 2013, McGraw-Hill Education. All Rights Reserved.

15-17© 2013, McGraw-Hill Education. All Rights Reserved.

15-18

Monetary Policy as an

Economic Tool  The Fed and control of inflation

 Opposite of fighting an economic downturn

 Increasing interest rate on loans to member banks

 Raising reserve rate

 Selling government securities (bonds, notes, etc.)

 The politics of the Fed

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15-19© 2013, McGraw-Hill Education. All Rights Reserved.