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CE.13 - Role of Government in the U.S. Economy

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John Sheridan

on 19 February 2013

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Transcript of CE.13 - Role of Government in the U.S. Economy

CE.13 - Role of Government in the United States Economy CE.13a - Marketplace Competition The government promotes and regulates marketplace competiton. Ways the government regulates marketplace competition: Enforce antitrust legislation to discourage the development of monopolies. Engaging in global trade. Supporting business start-ups. Government agencies that regulate business: FCC (Federal Communications Commission EPA (Environmental Protection Agency FTC (Federal Trade Commission) These agencies oversee the way individuals and companies do business. CE.13b - Public Goods and Services Government provides certain goods and services that individuals and businesses acting alone cannot provide efficiently. Characteristics of most goods and services provided by government: Provides benefits to many simultaneously Would not likely be available if individuals had to provide them Include such things as: Interstate highways postal service national defense Ways governments pay for public goods and services: Through tax revenue Through borrowed funds Through fees (e.g. park entrance fees CE.13c - Impact of government taxation, borrowing, and spending The 16th Amendment to the Constitution of the United States of America authorizes Congress to tax personal and business incomes! 16th Amendment Taxing Borrowing Spending Government tax increases: reduce the funds available for individual and business spending Government tax decreases: increase funds available for individual and business spending Increased government borrowing: reduced the funds available to borrow by individuals and businesses Decreased government borrowing: increases the funds available to borrow by individuals and businesses Increased government spending: increases demand, which may increase employment and production Decreased government spending: reduces demand, which may result in a slowing of the economy May result in higher taxes May result in lower taxes CE.13d - Federal Reserve Acting as the Nation's Central Bank The Federal Reserve System (the Fed) is out nations central bank. As the central bank of the United States, the Federal Reserve System: has the duty to maintain the value of the national currency (dollar) regulates banks to ensure the soundness of the banking system and the safety of deposits manages the amount of money in the economy to try to keep inflation low and stable acts as the federal governments bank CE.13e - Consumer Rights and Property Rights The United States government passes laws and creates agencies to protect consumer rights and property rights. Individuals have the right of private ownership, which is protected by negotiated contracts that are enforceable by law. Government agencies establish guidelines that protect public health and safety. Consumers may take legal action against violations of consumer rights. CE.13f - Currency and Coins Money is defined as anything that is generally accepted as a method of payment. When the United States government issues coins and currency, people accept it in exchange for goods and services because they have confidence in the government. Government issues money to facilitate this exchange. The three types of money generally used in the United States are: coins Federal Reserve notes (currency) deposits in bank accounts that can be accessed by checks and debit cards Keeps the federal government’s checking accounts
Monitors federal government’s debts (loans taken from other banks) Sets a minimum on the amount of reserves a bank must keep on deposit.
Ensures banks will have enough money available to meet the demand for withdrawals. If there is more money in the economy that goods and services to spend it on, increased demand for goods and services will make prices rise. (Inflation) The Federal Reserve Bank acts as the “clearinghouse” for checks. Life of a Check

A person living in New York writes a check to someone in northern California.
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The party to whom the check is written deposits it in his/her bank.
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The bank credits the depositor‘s account and sends the check to the Federal Reserve Bank of San Francisco.
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The San Francisco Fed credits the amount of the check to the account that the depositor‘s bank has with them.
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The San Francisco Fed sends the check to the Federal Reserve Bank of New York.
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The New York Fed debits the account of the check issuer‘s bank.
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The New York Fed sends the check to the issuer‘s bank, which then debits the issuer‘s account.
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