Economic Policy

Type of Economy in the US

Type of Economy in the US

Mixed/Regulated capitalist economy

Economic policy

The set of policies and regulations the uS govt enacts to achieve certain economic goals

3 Major Goals of Economic Policy

-Stability -Economic prosperity -Consumer protection

Prosperity

-goal is to lessen/medigate impact of recessions and depressions

Stability

-goal is to control inflation

Recession

Less severe decline of economy

Depression

A steep, sustained decline of economy -unemployment reaches high lvls -EC growth stagnates and declines

Inflation

Consistent increase in price lvl of goods and services -opposite is deflation

Consumer Protection

-Consumers, workers/wage earners -During a deflation, consumers benefit -During an inflation, wage earners benefit

Schools of economic thought

-Laissez faire economics/capitalism -Keynesian economics/demand-side economics -Supply-side economics/reaganomics

Laissez-faire economics/capitalism

-means of production and distribution must be privately owned and operated for the sake of profit with no govt interference. -maximize profit -problem: coorps can ctrl expenses and go after employee wage -Great Depression: result of this philosophy, less regulation

Keynesian economics/demand-side economics

-focus on demand side and consumers -tool of preference: govt spending -recession: more spending on consumers -inflation: decrease spending, save more

Supply-side economics/reaganomics

-focus on supply side and producers -tool of preference: govt tax on producers -recession: decrease govt tax on producers -inflation: increase tax on coorps

Fiscal policy

-when govt relies on govt spending and taxation -Congress enacts this and uses budget to articulate spend policy -Budget deficit -Budget surplus -Balanced budget

Budget deficit

Revenues < expenses

Budget surplus

Revenues > expenses

Balanced budget

Revenues = expenses

Progressive tax

Refers to situations when income and effective tax rate increases/make more money, pay more tax -ex: income tax

Regressive tax

Refers when income increases and effective tax rate decreases/make more money, pay less tax -middle/low income ppl get affected -ex: property and sales tax