POSI Economic Policy

Features of Capitalism

1. Competition  

2. Limited government

3. Supply and Demand

Features of Democracies

1. Competitive elections 

2. Free Media 

3. Informed Citizens 

4. Competing political parties

Economics Definition

Distributing goods to meet people’s needs and wants

Adam Smith

Wrote Wealth of Nations and used the term invisible hand to describe the beneficial effects of competition

Demand increases…

prices rise, curve moves to the right

Supply increases…

Prices fall

Measures of Economic well being

1. Unemployment rate

2. Inflation Rate

3. Gross Domestic Product

Inflation definition

changes in prices

Fiscal Policy

taxing and spending is determined by the president and congress

Monetary policy

the federal reserve bank sets interest rates

Regulatory Policy

use of laws and regulations to control or influence economic activity and protect the public

John M Keynes

General theory of money, employment, and interest. defends the idea that the government can control aggregate consumer demand by adjusting taxing and spending

how to reduce inflation

raise taxes and reduce government spending

16th Amendment

permitted a tax on personal and business incomes

Payroll tax

what we all pay when we earn our wage

Federal Government revenue

income and payroll taxes

State Gov of Texas revenue

from the 8.25% sales tax

Local governments like school districts and cities revenue

property taxes

Deficit

Spending exceeds revenue

Surplus

Revenue exceeds spending

Aggregate demand increases

tax cuts, increased government spending, or lower interest rates that stimulate economic activity

The federal reserve chair- leading policy maker

Jerome Powell

income tax is…

progressive and rich pay higher taxes

what sets prices

supply and demand

Texas Railroad commission

Created by Governor Jim Hogg and set rates farmers would pay to use the railroad

Federal Reserve Board mandates

Keep prices stable to prevent inflation and maximize employment