Review for Chapters 15 and 16

1. Review for Chapters 15 and 16

2. What is the Fed?

3. What is the Fed? The Federal Reserve Board (odd acronym, I admit)

4. What is the Fed? The Federal Reserve Board (odd acronym, I admit) What does it do?

5. What is the Fed? The Federal Reserve Board (odd acronym, I admit) What does it do? Monitor and control money supply. (monetary policy)

6. What is the Fed? The Federal Reserve Board (odd acronym, I admit) What does it do? Monitor and control money supply. (monetary policy) How does it do that?

7. What is the Fed? The Federal Reserve Board (odd acronym, I admit) What does it do? Monitor and control money supply. (monetary policy) How does it do that? By changing the amount of money banks are required to hold in reserve, by changing the discount rate – the amount it charges banks for loans, by buying & selling government securities (bonds) and by changing interest rates that banks can charge.

8. What are transfer payments?

9. What are transfer payments? Payments that transfer wealth from one to another, for example Social Security payments, unemployment compensation and food stamps. Some, such as welfare payments and the Earned Income Tax Credit (EITC) are also transfer payments, but there is a sub-set and they are called entitlements – meaning that people are entitled to them because they qualify for them.

10. John Maynard Keynes is the father of Keynesian Economic thought. He was FDR’s chief economic advisor. Knowing this, what would a Keynesian economist do when the economy takes a down turn (such as now)?

11. John Maynard Keynes is the father of Keynesian Economic thought. He was FDR’s chief economic advisor. Knowing this, what would a Keynesian economist do when the economy takes a down turn (such as now)? He or she would increase government spending by borrowing money to make the payments, just like they did during the Great Depression, (when the government really began trying to improve the economy) trying to spend their way out of the recession.

12. What is the process to compiling the federal budget?

13. What is the process to compiling the federal budget? First, the OMB compiles the requests from all the different federal agencies. Then, after the President edits it some to his goals, he sends it over to Congress. Then the House & Senate Budget Appropriation Committees study the budget and makes changes. (Of course, entitlement programs such as Social Security cannot be fiddled with as per law), then. After all this, Congress sends the budget to the President for signing into law. Of course, Congress can still pass appropriation (spending) bill that the President can sign into law or veto.

14. What is fiscal policy?

15. What is fiscal policy? It a tool of economic management by which the government (Congress & the President) attempts to maintain a stable economy through its taxing and spending decisions

16. What is fiscal policy? It a tool of economic management by which the government (Congress & the President) attempts to maintain a stable economy through its taxing and spending decisions What is supply side economics?

17. What is fiscal policy? It a tool of economic management by which the government (Congress & the President) attempts to maintain a stable economy through its taxing and spending decisions What is supply side economics? Also called Reagonomics, a fiscal policy that emphasizes the “supply” side of the economy – would include tax cuts for businesses and generally high income individuals.

18. What are externalities?

19. What are externalities? Side-effects of business that businesses don’t pay for – generally negative, like cleaning up Love Canal after Hooker Chemical spent years dumping toxic waste. They cost everyone in the form of tax dollars that could be used for other programs and are used to clean up after businesses.

20. What is the poverty line?

21. What is the poverty line? As defined by the federal government, the annual cost of a thrifty food budget for an urban family of four, multiplied by three to allow for the cost of housing, clothes, and other expenses – families below the poverty line are considered poor and are eligible for certain forms of public assistance. It worthy to note that in America, that 1 in 5 children live in poverty and are the benefits of many of these entitlement programs.

22. What is negative government?

23. What is negative government? The belief that government governs best by staying out of people’s lives, giving individuals as much freedom as possible to determine their own pursuits

24. What is negative government? The belief that government governs best by staying out of people’s lives, giving individuals as much freedom as possible to determine their own pursuits What is positive government?

25. What is negative government? The belief that government governs best by staying out of people’s lives, giving individuals as much freedom as possible to determine their own pursuits What is positive government? The belief that government intervention is necessary in order to enhance personal liberty when individuals are buffeted by economic and social forces beyond their control.

26. What is deregulation?

27. What is deregulation? When the government rescinds some of the laws and policies that control certain businesses. For example, the airline industry is very regulated in as far as safety goes, but much of the regulations regarding air fairs and such have been eliminated. The finest line government walks is regulating businesses to prohibit them from restraining trade while still allowing them to compete in a global market.

28. How does the government help businesses?

29. How does the government help businesses? Besides tax breaks & tax credits for expansion and research & development, the government provides loan guarantees and direct loans to businesses, as well as those benefits we don’t usually think of. Such as building the roads they use do deliver their goods, funding state universities and schools to provide trained workers (training businesses don’t have to pay for), providing national defense so they can engage in business unmolested by nare-do-wells.

30. What is public policy?

31. What is public policy? A decision of government to pursue a course of action designed to produce an intended outcome. For example, President Obama’s public policy involves universal health care, which was eventually passed into law. Think of it as a goal of an administration in attempting to get something done that would affect the economy or lives of all Americans.

32. What is a means test?

33. What is a means test? This is the requirement that people who get public assistance must prove that they are poor and are eligible for the benefit they’re applying for. We don’t look for the poor people to give them money, they have to go to the government and prove it.

34. What is a means test? This is the requirement that people who get public assistance must prove that they are poor and are eligible for the benefit they’re applying for. We don’t look for the poor people to give them money, they have to go to the government and prove it. What are in-kind benefits?

35. What is a means test? This is the requirement that people who get public assistance must prove that they are poor and are eligible for the benefit they’re applying for. We don’t look for the poor people to give them money, they have to go to the government and prove it. What are in-kind benefits? A benefit that is a cash equivalent, like food stamps or rent vouchers. Ensures that the recipients will use these public funds in a specific way.

36. What is the No Child Left Behind Act?

37. What is the No Child Left Behind Act? President George W. Bush, in 2001, required national testing in reading, math and science and tied federal funding to the test results. Schools that showed no improvement in students’ test scores after three years of receiving aid, the students were allowed to transfer else where and the school’s federal assistance was reduced.

38. What was the Welfare Reform Act of 1996?

39. What was the Welfare Reform Act of 1996? Passed by President Clinton, replaced the AFDC with the Temporary Assistance to Needy Families, the goal was to limit the amount of time recipients can receive assistance and giving states an incentive to get welfare recipients into jobs. Included block grants to develop programs that help parents find jobs. The states took over primary control of the poor.

40. The End