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Economic policy How does government influence the economy, which influences citizens’ well being?

Economic policy How does government influence the economy, which influences citizens’ well being?. Monetary policy : gov’t manipulation of the money supply Fiscal policy : use of taxes, spending and borrowing to influence the economy. Economic theories used by policymakers.

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Economic policy How does government influence the economy, which influences citizens’ well being?

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  1. Economic policy How does government influence the economy, which influences citizens’ well being?

  2. Monetary policy: gov’t manipulation of the money supply Fiscal policy: use of taxes, spending and borrowing to influence the economy

  3. Economic theories used by policymakers • Monetarism – supply of money is key to nation’s economic health • Keynesian theory – government spending and deficits can stimulate slow economy • Supply side economics – fiscal policy should stimulate SUPPLY of goods, mainly through lowering taxes

  4. Social welfare policies – how funded? TAXES – can be progressive, proportional or regressive TRANSFER PROGRAMS – benefits given directly to individuals by government (e.g. food stamps, Social Security)

  5. SOCIAL PROGRAMS • SOCIAL SECURITY ACT 1935 • Creates Social Security and AFDC • AFDC (Aid to families with dependent children) • PRWORA 1996 (Personal responsibility and work opportunity reconciliation act) – “welfare reform”

  6. Social policy in US versus other industrialized democracies • Generosity • Tax levels • Why difference?

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