POSI

Adam Smith wrote Wealth of Nations in 1776 and this has been seen as a defense of free market capitalism.

GDP, the Consumer Price Index, and the unemployment rate are three measures to tell us how the economy is doing.

The business cycle is the change in these three criteria. During prosperity, inflation and the GDP usually increase while the unemployment rate decreases

John M. Keynes wrote General Theory in 1936 and this defends the idea that governments can manage aggregate consumer demand.

Inflation can be reduced by raising taxes and reducing government spending.

The 16th Amendment in 1912 permitted the income of a tax on personal and business incomes.

The income tax is due in April and the main source of federal government revenue.

The payroll tax is what we all pay when we earn our wage.

The state government of Texas gets its money from the sales tax.

The Federal Reserve Board sets interest rates. During recession, the Fed will lower interest rates. To curb inflation, the Fed will raise interest rates.

Aggregate demand increases with tax cuts, gov’t spending, interest rate cuts.

Inflation is caused by a spike in demand or a decrease in supply.

In 2020, supply chains were disrupted because of the pandemic.

Everyone who works pays the payroll tax. All pay the same 15.2% rate.

The income tax is progressive and rich pay higher rates.

Mandatory spending is social security, etc.

TCJA of 2017 cut taxes primarily on rich.

Federal Reserve Board sets interest rates. This is monetary policy.

The Fed chair is Jerome Powell- he is a leading policy maker.

Reducing interest rates makes it easier to borrow and GDP should grow.

16th Amendment made the federal personal income tax possible.

Texas does not have an income tax but depends on the sales tax on consumer purchases

Local governments depend on the tax on real estate or property

16th Amendment made the income tax possible in 1912

Texas’s state government gets its revenue from the sales tax

Local governments depend on a tax on real estate or property

The Tax Cuts and Jobs Act of 2017 reduced taxes on upper income groups

Tax exemptions like deductions help a taxpayer reduce her tax liability

The payroll is a single flat rate all earners pay.

Monetary policy is interest rates and the Fed chair is J. Powell

Bond issues with healthy economies can offer lower interest rates

Budget surpluses are when government revenue exceeds spending.

CARES Act of 2020 put $2 trillion into the economy

The debt limit is $31 trillion. The U.S. must raise this or declare bankruptcy on its existing debt.

The purpose of regulation is to correct problems or reduce risks in modern life.

*The Texas Railroad Commission was created in 1891 and set prices. It regulations oil wells now.

*Three differences between social and structural regulation.

*Fiscal policy refers to taxing and spending.

*The federal government relies mostly on payroll and income taxes.

*The state of Texas relies on the sales tax (which can be 8.25%) on what we buy.

*Local governments like schools, counties, and cities rely on property taxes.

*Federal spending on health and old age has grown at the expense of military spending

Texas has biannual budgets and budget surpluses. It will pass a two-year budget in this session.

Regulation corrects market problems like imperfect information and oligopoly.

Texas Railroad Commission was created in 1891 to set rail rates but now regulates oil.

Regulation can be structural or social.

Know how each type is different.

Public good are provided by government; you obtain private goods on your own.

Defense and a clean environment are examples of public goods. We all benefit.

The Consumer Financial Protection Board was created in response to the 2008 Financial Crisis.