1. Economics and Politics
16.3
Economics and Politics

2. Changing Nature of Economic Policy
Main Ideas
Discretionary fiscal policies were popular in the post-World-War II period, but their popularity declined after President Reagan took office.
The Federal Reserve System has filled the void left by the decline of discretionary fiscal policy.
The Fed is much more responsive to economic issues than the federal government.
Supply-side policies have been popular, but they did little to help when the economy slumped in 2008.
Policies used to stabilize the economy during the Great Recession included monetary policy, qualitative easing, and passive fiscal policies.

3. Passive Fiscal Policies:
Quantitative Easing:
Technique used by the Federal Reserve to keep interest rates low and encourage banks to take on more loans to stimulate the economy.
Passive Fiscal Policies:
Fiscal actions that do not require new actions to go into effect.

4. How did the declining popularity of discretionary fiscal policy force the Fed to take a larger role in managing the economy?
Fiscal policy—raising or lowering taxes and government spending—was a way for Congress to stimulate the economy, so when Congress no longer followed this strategy, it left a void in the management of the economy. The Fed had the responsibility to conduct monetary policy, which enabled it to fill this void

5. Economics and Politics Today
Main Ideas
In recent years, the fields of economics and politics have merged.
The main reason for differences of opinions among economists is that they place different importance on various problems.
Most economic theories are a product of their times; as times and issues change, so does economic theory.
The president’s Council of Economic Advisers is a three-member group that reports on economic developments and proposes strategies.
Economists have helped the American people become more aware of the workings of the economy, which benefits everyone.

6. Council of Economic Advisors
Baby Boomers:
People born in the United States during the historically high birthrate years from 1946 to 1964.
Council of Economic Advisors
Three –member group that devises strategies and advises the President of the United States on economic matters.

7. If Baby Boomers are retiring and they outnumber the amount of people in the workforce, what could be a problem for social security?
There would be less money going into social security than being pulled out. Creating a deficit.