Chapter 18 Economic Policy

Vocabulary Definitions (Write the definitions in your own words & try to insert or link a picture with each definition.)

Business cycles- fluctuation between expansion and recession that is a part of modern capitalist economies
Discount rate
Economic Regulation- the process of manipulating the economy to prevent market failure or improving the status of the economy in general.
Economic stability - is when the economy is strong and stable. This means that employment is high, there is economic growth, and a rising national income.
Federal Reserve Board- The central banking system of the United States.
Fiscal policy - refers to government policy that attempts to influence the direction of the economy through changes in government taxes, or through some spending.
Gross domestic Product (GDP)- the total market value of all final goods and services produced within a given country in a given period of time.
Inflation - a rise in prices due to high demand for goods, which results in buyers competing for the supply.
Interventionist Rate- alternative to the laissez-faire state, the government takes an active role in the managing of a private enconomy
Laissez-faire - economic system functions best when there is no interference by the government.
Monetary policy
Recession - a decline in the economy which results in a rise in unemployment, and a fall in investments and production.
Social regulation
Social Regulation- Governmental regulation of the quality and safety of products as well as the conditions under which goods and services are provided

Roots of Government Intervention in the Economy

The Progressive Era (1901-1917)

The Great Depression and the New Deal
During the 1920's America saw a time of economic prosperity brought on by the very laissez faire type administrations of Harding, Coolidge, and Hoover. However, the stock market eventually crashed and threw the nation into the most intense depression of the nation's history; all parts of the economy were negatively effected- business, finance, labor, agriculture, and manufacturing. The Great Depression appeared to be a sign of what would be the ultimate failure of capitalism, but FDR came to the rescue. His New Deal policy turned America into an interventionist state- that being an economy with more intervention from the government. FDR brought about numerous changes with his New Deal, and America saw a slow but steady rise in the economy due to this new plan.

The Post-World War II Era

The Social Regulation Era

The process of removing restrictive regulations on previously regulated companies.

Stabilizing the Economy

Monetary Policy: Controlling the Money Supply-
The regulation, by the Federal Reserve System, of the money supply in order to maximize production and employment, and stabilize prices.

The Federal Reserve System

The President and the FRB

Fiscal Policy: Taxing and Spending
Any macroeconomic policy involving the levels of government purchases, transfers, or taxes, usually implicitly focused on domestic goods, residents, or firms. A fiscal stimulus is an increase in purchases or transfers or a cut in taxes.

The Effects of Globalization

The Budgetary Process

Budget Initiatives of the George W. Bush Administration

The Budget Deficit and the Debt

The Economics of Environmental Regulation

File Sharing and Protecting Intellectual Property

The Environmental Protection Agencyexternal image epafiles_logo_epaseal.gif

external image thumbnail.aspx?q=1171072751156&id=417e63ef1224c675afbb7461cc1f9a58Some new concerns added since our book was written is recycling. This process is three things:
Step 1. Collection and Processing
Step 2. Manufacturing
Step 3. Purchasing Recycled Products
Here are some interesting facts the EPA provides on their website about recycling:
  • Twenty years ago, only one curbside recycling program existed in the United States, which collected several materials at the curb. By 2005, almost 9,000 curbside programs had sprouted up across the nation. As of 2005, about 500 materials recovery facilities had been established to process the collected materials.
  • In 1999, recycling and composting activities prevented about 64 million tons of material from ending up in landfills and incinerators. Today, this country recycles 32 percent of its waste, a rate that has almost doubled during the past 15 years.
How the Fed Controls The American Economy
-Federal Advisory Council-Advises Board of Governors- who appoint members in the Federal Reserve Bank- who are elected and receive capital from the Member Banks-who serve in the Open Market Committee

Connecting Theory to Reality