The U.S. national debt has more than doubled over the past decade, making the use of money extremely crucial in the country’s decision making. Inevitably, the two major political parties in America will have to sort it out with one another. The biggest difference is that Republicans have been identified as the party favouring the rich and big business, whereas the Democrats have been viewed as being sympathetic to labor and the poor.
In fact, the government plays a dual role in being linked to the nation’s economy. It measures the economic status of the nation and attempts to develop effective measures to keep the economy on the right track. The government can choose between a monetary policy or a fiscal policy to boost the nation’s economy.
Monetary policy is defined as the control of the money supply and the cost of credit. The Federal Reserve System was established in 1913, is an independent agency that regulates the money supply through means such as open-market operations (buying and selling of government securities), reserve requirements (establishing the legal limitations on money reserves that banks must keep against the amount of money they deposited in Federal Reserve Banks), and discount rates (determining the rate at which banks can borrow money from the Federal Reserve System).
Fiscal policy is established by an economic policy that determines how the economy is managed as a result of government spending and borrowing and the amount of money collected from taxes. The two contrasting philosophies related to fiscal policy are Keynesian economic developed by John Maynard Keynes and supply-side economics developed by Ronald Reagan’s economic team. Keynes advocated an increase in national income so that consumers could spend more money either through investments or purchases of goods and services.
In regards to the farm industry’s problem as a result of the dust bowl disaster of the 1930s, the Agricultural Adjustment Act of 1933 created the farm subsidy program. The core of this program was price supports, meaning the government guaranteed the prices of certain farm goods by subsidising farmers not to grow certain cops and by buying food directly and storing it. The philosophy behind these measures is to protect the nation’s farmers by artificially keeping prices up in the short term, thus keeping farmers in business.
Big business is also affected by government economic policies such as the balance of trade, the amount of business regulation, and the support of government. At 2000, America had a trade deficit of more than $29 billion, forcing treaties like the North American Free Trade Agreement to be created in order to reduce the nation’s trade deficit.
Consumer policy is determined through the efforts of independent regulatory agencies such as the Food and Drug Administration, the Consumer Product Safety Commission, and the Federal Trade Commission. The government takes an important role in protecting the consumers and making sure that businesses are helped at a right pace.
The country is also faced with the problem of deficit spending. Deficit spending is when expenditures exceed revenues. So the problem of which programs’ budget to cut became a big challenge for the government.
Income distribution refers to the portion of national income that individuals and groups earn. Income is defined as the specific level of money earned over a specific period of time, whereas wealth is what is actually owned. Taking into account of the disparity of the distribution of income and wealth, the United States Census Bureau has adopted a poverty line. This line measures what a typical family of four would need to spend to achieve an “austere” standard of living.
Taxes are the major source of income for federal, state, and local governments. The three types of personal taxes are progressive taxes, regressive taxes, and proportional taxes. A progressive tax collects more money from the rich than the poor on a sliding scale. If the government takes an equal share from everybody regardless of income, it’s called a proportional tax. A regressive tax has the poor paying a greater share than the rich.
In fact, the government plays a dual role in being linked to the nation’s economy. It measures the economic status of the nation and attempts to develop effective measures to keep the economy on the right track. The government can choose between a monetary policy or a fiscal policy to boost the nation’s economy.
Monetary policy is defined as the control of the money supply and the cost of credit. The Federal Reserve System was established in 1913, is an independent agency that regulates the money supply through means such as open-market operations (buying and selling of government securities), reserve requirements (establishing the legal limitations on money reserves that banks must keep against the amount of money they deposited in Federal Reserve Banks), and discount rates (determining the rate at which banks can borrow money from the Federal Reserve System).
Fiscal policy is established by an economic policy that determines how the economy is managed as a result of government spending and borrowing and the amount of money collected from taxes. The two contrasting philosophies related to fiscal policy are Keynesian economic developed by John Maynard Keynes and supply-side economics developed by Ronald Reagan’s economic team. Keynes advocated an increase in national income so that consumers could spend more money either through investments or purchases of goods and services.
In regards to the farm industry’s problem as a result of the dust bowl disaster of the 1930s, the Agricultural Adjustment Act of 1933 created the farm subsidy program. The core of this program was price supports, meaning the government guaranteed the prices of certain farm goods by subsidising farmers not to grow certain cops and by buying food directly and storing it. The philosophy behind these measures is to protect the nation’s farmers by artificially keeping prices up in the short term, thus keeping farmers in business.
Big business is also affected by government economic policies such as the balance of trade, the amount of business regulation, and the support of government. At 2000, America had a trade deficit of more than $29 billion, forcing treaties like the North American Free Trade Agreement to be created in order to reduce the nation’s trade deficit.
Consumer policy is determined through the efforts of independent regulatory agencies such as the Food and Drug Administration, the Consumer Product Safety Commission, and the Federal Trade Commission. The government takes an important role in protecting the consumers and making sure that businesses are helped at a right pace.
The country is also faced with the problem of deficit spending. Deficit spending is when expenditures exceed revenues. So the problem of which programs’ budget to cut became a big challenge for the government.
Income distribution refers to the portion of national income that individuals and groups earn. Income is defined as the specific level of money earned over a specific period of time, whereas wealth is what is actually owned. Taking into account of the disparity of the distribution of income and wealth, the United States Census Bureau has adopted a poverty line. This line measures what a typical family of four would need to spend to achieve an “austere” standard of living.
Taxes are the major source of income for federal, state, and local governments. The three types of personal taxes are progressive taxes, regressive taxes, and proportional taxes. A progressive tax collects more money from the rich than the poor on a sliding scale. If the government takes an equal share from everybody regardless of income, it’s called a proportional tax. A regressive tax has the poor paying a greater share than the rich.