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CHAPTER EIGHTEEN Study Chapter Summary ·
Economic policy addresses the problem of
economic security not for some particular group or segment of society but for
society itself. For much of our history, policymakers believed that government
should not play much of a role in regulating the economy, instead letting the
market take care of itself. Since the Great Depression, government has played a
more active role in regulating the economy. ·
The capitalist market operates according to
the laws of supply and demand. These laws influence a country's gross domestic
product, or GDP. Because supply and demand may increase or decrease, the
economy is not stagnant. It can enter periods of booms, when GDP rises, or
busts, when GDP drops. ·
Economic policy has two principal subsets:
fiscal and monetary. Fiscal policy,
created by Congress and the president, uses change in government spending or
taxation to produce desired changes in discretionary income, employment rates,
or productivity. The Federal Reserve directs monetary policy by changing the supply of money in circulation in
order to alter credit markets, employment, and the rate of inflation. ·
The politics of monetary and fiscal policies
are quite different. Because the Fed sets monetary policy, it is insulated from
political pressures. Fiscal policy is extremely political as politicians try to
balance the competing goals of providing goods and services to constituents and
keeping taxes low. ·
Since the 1930s, government has been more
involved in economic regulation, specifically regarding business, unions, and
trade. Government has tried to limit the power and possible corruption of
business by passing antitrust policies and placing regulations on companies. It
has protected workers by allowing them to unionize and to engage in collective
bargaining, and it has limited the strength of unions with legislation like
Taft-Hartley. Finally, the government has long debated whether it should take a
protectionist stance toward trade policy by implementing things such as
tariffs, or whether it should promote more open, free trade policies. ·
Economic policymaking is generally made by
elites, with limited input from the public. Still, interest groups and public
opinion can influence economic policymaking. Learning Objectives
After
reading this chapter, you should understand ·
basic economic principles ·
monetary policy and fiscal policy ·
economic regulatory policy, with a focus on
antitrusts, unions, and trade ·
the relationship of economic policy to the
citizens |
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