eco

Overview of Testing Procedures

  • Students must take the SCLE at Kendall campus.

  • If the student has previously passed the exam, they do not need to retake it.

  • Importance of the month to take SCLE for those who have not passed it.

  • Resources available: Miami Dade College website for FCLE includes exam sections and sample questions.

Student Credit Status

  • Need for at least 15 credits from previous semesters for certain operations.

  • Confirming student credit status:

    • No one in attendance needed to take 15 credits.

    • One student (Miss Bikon) confirmed they have at least 15 credits.

Introduction to Monetary Policy

  • Topics covered in the previous lecture included:

    • Definition of political economy.

    • Key components such as monetary policy, money supply, inflation, and unemployment.

    • Government actions: discount rate, bank reserve requirements, open market sales of securities.

Components and Functions of Monetary Policy

  • Discount Rate:

    • Definition: The rate at which member banks borrow from the Federal Reserve.

  • Bank Reserve Requirements:

    • Definition: The amount of cash member banks must hold.

  • Open Market Sales of Securities:

    • Government actions through buying and selling bonds.

    • Selling bonds decreases money supply; buying bonds increases money supply.

  • Importance during inflation:

    • Raise discount rate and reserve requirements to contract the economy.

  • Importance during recession:

    • Lower discount rate and reserve requirements to stimulate the economy.

Fiscal Policy Introduction

  • Definition of fiscal policy.

    • Government taxing and spending to affect the economy.

  • Control of fiscal policy by Congress and the President via budget, presented annually by the Office of Management and Budget (OMB).

Government Actions during Economic Conditions

  • In recession:

    • Monetary Policy: Decrease interest rates.

    • Fiscal Policy: Lower taxes and increase government expenditures to reduce burden and enhance disposable income.

  • Explanation using an example of disposable income when tax rates are lowered:

    • Example:

      • Initial scenario: Working and earning $1000 with 20% tax leads to $800 take-home pay.

      • New scenario with 10% tax results in $900 take-home pay.

    • 90% of people would spend this increased disposable income, injecting into the economy.

      • Calculation: $100 * 150,000,000 = $1,500,000,000 added to the economy weekly.

    • Keynes's view on government spending as crucial to providing jobs and stimulating the economy through projects like the Tennessee Valley Authority.

Implications of Government Taxation Decisions

  • Critique of Keynes's proposal about reduced taxes and increased spending possibly causing deficits.

  • Understanding inflation:

    • Explanation that inflation occurs when too much money chases too few goods.

  • Government's approach during inflation:

    • Increase taxes and reduce government spending to slow the economy.

Practical Examples of Taxation

  • Introduction to bed tax in London and its purpose for funding infrastructure for tourism.

    • Explanation of tax mechanics on lodging:

      • Potential flat fee or percentage of hotel room cost.

Three Types of Taxation

  • Progressive Tax System:

    • Definition: The higher the income, the higher the percentage of taxes owed.

      • Example:

        • Income of $10,000 taxed at 10%, income of $100,000 possibly at 22%.

  • Regressive Tax System:

    • Definition: Higher income leads to a lower percentage of taxes.

    • Not commonly used globally due to incentives created for higher earners.

  • Proportional Tax System (Flat Rate):

    • Definition: Everyone pays the same tax percentage regardless of income level.

      • Example for flat rate tax:

        • At a flat rate of 20%, a person making $10,000 pays $2,000; a person making $100,000 pays $20,000.

    • Suggestion for a tax free threshold for initial income (e.g., first $50,000).

Administrative Tasks

  • The professor takes roll call for attendance to confirm attendance of students.

Student Questions

  • The professor opens the floor for questions about fiscal policy and future topics discussed in class.