Patterson ch15
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Transcript of Patterson ch15
© 2015 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 15
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-2
Government as Regulator of the Economy
Efficiency through government interventionPromoting competitionMaking business pay for indirect costsDeregulation and underregulation
Equity through government interventionThe politics of regulatory policy
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-3
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-4
Government as Protector of the Environment
Conservationism: the older waveDual use of federal lands: recreation and resource use
Environmentalism: the newer waveClean air, water, and land legislationEnvironmental Protection Agency, 1970Global warming and energy policy
Carbon-based greenhouse gasesKyoto Protocol, 1997Republican unwillingness to address the problem
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-5
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-6
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-7
Government as Promoter of Economic Interests
Promoting businessGovernment-provided loansSpecial tax breaksSubsidiesTraditional services: education, transportation, and defense
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Government as Promoter of Economic Interests
Promoting laborNational Labor Relations Act of 1935Minimum wageMaximum work weekUnemployment benefitsNondiscriminatory hiring practices
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-9
Government as Promoter of Economic Interests
Promoting agricultureHomestead Act of 1862Farm programs to eliminate some farming riskFederal payments account for more than a fifth of net
agricultural incomeAmerican farmers among the most heavily subsidized in
the worldStrong support for subsidies from rural members of
Congress
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-10
Fiscal Policy as an Economic ToolDemand-side policy
Emphasizes the consumer (demand) component of the supply–demand equation.
Government spending to alleviate economic depression or recession
Generally preferred by Democratic lawmakersCan result in higher budget deficits and an increased
national debt
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-11
Fiscal Policy as an Economic ToolSupply-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 higher budget deficits and an increased
national debt
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-12
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-13
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-14
Fiscal Policy as an Economic ToolFiscal policy: practical and political limits
Republican and Democratic lawmakers are far apart on how best to deal with recessionary periods
Both parties enact policies that increase the national debt
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-15
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-16
Monetary Policy as an Economic Tool
The FedControl over money supply
Raise/lower the cash reserve required of member banksRaise/lower interest rate on member banks
Fighting an economic downturnDecreasing interest rate on loans to member banksLowering reserve rateBuying government securities (bonds, notes, etc.)
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-17
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© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-19
Monetary Policy as an Economic Tool
The Fed and control of inflationOpposite of fighting an economic downturnIncreasing interest rate on loans to member banksRaising reserve rateSelling government securities (bonds, notes, etc.)
The politics of the FedIs the Fed representative?Is the Fed accountable?
© 2015 The McGraw-Hill Companies, Inc. All rights reserved. 15-20