Economic Economic PolicyPolicy

Economic Economic PolicyPolicy

An Overview of Chapter 23

An Overview of Chapter 23

Pop Quiz 23

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Comparing TermsMacroeconomics• Deals with broad &

general aspects of an economy, as the  relationship between income & investments of a country as a whole.

• Measures the national economy: GDP, inflation, unemployment, etc.

Microeconomics• Deals with specific

aspects of one part of an economy, like households, businesses, individuals, etc.

• Measures the income, profits, and well-being of a particular group.

Monopolies• What is a monopoly?• Why are monopolies “bad” for

consumers?– Artificially high prices– No substitutes for good or service– No incentive to stop poor service or quality

• Adam Smith believed one of the few roles of government in an economy was to keep competition fair.

Government Intervention

• Sherman Anti-trust Act made monopolies that intentionally hurt competition illegal.

• Clayton Anti-trust Act gave the federal government the power to break up illegal monopolies.

• The Federal Trade Commission has the authority to fine, regulate, and even break up businesses that act like monopolies. They must approve mergers of businesses.

• So do monopolies still exist? YES!

Natural Monopolies

• Exist because seller has a unique product or idea.

• Examples?

Government Monopoly

• Run by or exist by the permission of the federal government.

• Examples?

Geographical Monopolies

• Exist due to the fact that no other competition is in area.

• Examples?

Technological Monopolies

• Exists due to patents and copyrights or because competition cannot replicate idea.

The Business Cycle

Economic Indicators• GDP is the total dollar value of all

FINAL GOODS produced in a country in a year.

• Not affected by inflation (Real GDP)• Inflation can affect GDP (ex. Gas

prices)• CPI (consumer price index)

Economic Indicators• Unemployment is the total # out of

work actively seeking a job– Full employment is around 4%– Highest unemployment was 33% during

the Great Depression

• Unemployment is gauged by the number of people applying for benefits.

• Unemployment has an impact on many other economic indicators.

Controlling the Controlling the EconomyEconomy

Fiscal PolicyControlling taxing and spending by

the government to influence the economy. Affects incomes,

services, benefits & spending. Fiscal policy is controlled by the

President and Congress.

Affecting the Economy

• How does a rise in taxes effect the economy? Explain.

• How does an increase in government spending (such as on programs like building bridges, schools, or roads) effect the economy? Explain.

• Using the above examples, how does the government use fiscal policy to affect the economy?

Types of TaxesIndividual

Corporate

Social Insurance

Excise

Estate/Gift

Miscellaneous

Custom Duties

49%33%

9%

The Current National Debthttp://www.brillig.com/debt_clock/

Who is ultimately responsible for our National Debt?

• Presidents make the budget.• Congress approves the budget.• People demand services, low

taxes.

How the Debt Increases

Public Assistance

• Public Education

• TANF

• WIC

• SSI

• Social Security

• Food Stamps/EBT