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Government & Economics 

Government & Economics . Review your monetary policy notes!! Draw and label this Business Cycle in your note book!! (Expansion, Contraction, Peak, Trought, Trendline). Monetary Policy. The FED’s use of interest rates to EXPAND or CONTRACT the money supply, influencing the economy

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Government & Economics 

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  1. Government & Economics  Review your monetary policy notes!! Draw and label this Business Cycle in your note book!! (Expansion, Contraction, Peak, Trought, Trendline)

  2. Monetary Policy • The FED’s use of interest rates to EXPAND or CONTRACT the money supply, influencing the economy • Place a A on the Business Cycle where the FEDS would raise interest rates to help a economy that is heating up. • Place a B on the Business Cycle where the FED would lower Reserve Requirement to jump start the economy. • Place a C where you think we are now.

  3. Fiscal Policy • FISCAL POLICY: the Federal GOVERNMENT TAXING & SPENDING program annually as part of the budget (tools: taxes & spending programs)

  4. GDP = C + I + G Government must step up and spend money to encourage “C & I” to do the same. When consumers & businesses are not spending GDP will suffer You gotta spend $$ to....

  5. INJECTIONS Put money into circulation in times of recession Federal Government: (1) Lower Taxes (2) Increase Gov’t spending programs (to help people – Bail Outs, subsidies, more social welfare) LEAKAGES Get money out of circulation in times of inflation Federal Government (1) Raise Taxes (2) Decrease Gov’t spending programs FED and Federal Government can work together to help economy:

  6. Have out HW Warm Up:GDP = C + I + G When assisting the economy, should the government help the consumers or the producers? Explain.

  7. Fiscal Policies & Politics • Demand-Side Economics(a.k.a. Keynesian Economics) *Named after early 20th century economics John Maynard Keynes (an FDR advisor) *Government actions to help economy by lowering unemployment and stimulating demand BUSINESS ↑$↑ PEOPLE

  8. Fiscal Policies & Politics Government does this through: Transfer Payments: a payment govt gives to citizens for which it receives nothing in return (transfer money) Ex) Social Security, Welfare, Medicaid, FoodStamps/WIC President FDR used this theory with his New Deal’s PRIMING THE PUMP!!

  9. Warm Up: Why do legislators support demand-side economic policies?

  10. 2) Supply-Side Economics *Policies designed to stimulate output and lower unemployment by increasing production rather than demand BUSINESS ↓$↓ PEOPLE

  11. Government can do this through: Privatization: the providing of public goods is turned over to private, profit-making firms Ex) BFI Garbage rather than Town Highway Dept. President Hoover’s TRICKLE-DOWN and Reaganomics followed this theory.

  12. Which Side to Help? The Circular Flow of Economic Activity BUY G&S $ $ Supply-Side: give money to businesses (Republican) Demand-Side: give money to consumers (Democratic) BUY LLC $ $

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