# Ideology & Economic Policy ## Political Ideology and the Marketplace using government policy to further economic development by using taxes, spending programs etc. ## Keynessian Economics Deal with economic policy related to gov spending and taxation. Beleif that economy wont operate on 100% cap without government involvement Gov should step in and do demand if it is falling too low ## Fiscal Policy economic policy related to gov spending ant taxes ## Multiplier effect mechanism where increasing spending causes economic growth greater than the amount of spending ## Supply-Side Economics (fiscal conservatives) belif that the gov should leave as much of money supply to the people and let laws of economics deal with the market. laissez-faire market theory ## Taxing article 1 of constitution gives congress taxation powers ## Sixteenth Amendment allowed congress to tax people's incomes ## Internal Revenue Service (IRS) goverment agency that manegess collection process of taxes ## Progressive Tax as one gets better so does one's taxes ## Flat Tax all citizens should be taxed the same amount ## Spending government spends its budget on different things depending on the party. Both parties need to vote on the acutal budget. ## Federal Suprlus and Deficit Chart often we have a lot less surplus government spending. especially since the 2008 financial crisis. ## Monetary Policy how the goverment manages supply and demend of its currency and the value of the dollar. ## Inflation too much dollars in circulation and then ricing prices and devaluation of the dollar occurs ## Federal Reserve Board gov agency that manages the monetary policy by buying and selling securities and bonds, as well as the amount of money reqiired at reserves as well as setting interest rates. ## Discount Rate the interest rate at which the government loans actual dollars to comerical banks. tends to set the interest rates for consumers as well ## Reserve Requirement every bank needs to keep a certain amount of money in their reserves in order to prevent a great depression. effects how much the bank can loan out. ## Bonds government IOSs - promise that the US will pay back later with interest. -- note to self: i need to buy a bond ## Federal Reserve and the Economy ??? ## Think as a Political Scientist Study the graphics and answer the questions that follow 1. What inferences can be made from the data? that as the economy has declined the discount rate has lowered in order to help boost the economy 2. What additional information about the government's economic activity over this period might make this graphic more valuable in understanding showing different historical events relating to the us history, vietnam war, cold war, economic bubbles etc ## Differing Views on Monetary Policy Globalization people view money very differently as it is a political discussion. some thing easy-money is good while others look back at history and state that it is a contributing factor to bad events ## Trade Balance nation that exports more than it imports ## NAFTA (North American Free Trade Agreement) 1994 agreement between US, Canada, Mexico. Removed import taxes between in order to make a more competative continent compared to the EU and Europe ## Essential Question: What are the differing political ideologies in the government's role in regulating the marketplace, and what impact do those ideologies have? 1. Conservative Ideology (Regulating the Marketplace, Fiscal Poilicy, Monetary Policy, Trade) Do not like to regulate the market, government should make the economy handle eveythign itself and that the banks should manage money so make interest rates low 2. Liberal Ideology (Regulating the Marketplace, Fiscal Poilicy, Monetary Policy, Trade) regulate and incentivise programs in order to further social progress, taxes should be different for people so that money is fairly used