1. ECONOMIC POLICY MONEY MONEY MONEY MONEY!!!

2. GOVERNMENT ECONOMIC POLICY 1.MONETARY POLICY 1.CONTROLLED BY THE FEDERAL RESERVE 2.MAINTAIN STABILITY OF OUR CURRENCY 2.FISCAL POLICY 1.SPENDING AND TAXING BY GOVERNMENT 2.THE BUDGET IS THE GREATEST TOOL

3. MONETARY POLICY CONTROLLED BY THE FEDERAL RESERVE –BOARD OF GOVERNORS APPOINTED BY THE PRESIDENT, APPROVED BY THE SENATE(14 YEAR TERMS) –CHAIRMAN OF THE FEDERAL RESERVE POWERFUL IN SETTING MONETARY POLICY(4 YEAR TERM) THE FED ACTS AS THE BANK’S BANK

4. MONETARY POLICY THREE TOOLS OF THE FEDERAL RESERVE –DISCOUNT RATES –RESERVE REQUIREMENTS –SECURITIES TWO TYPES OF MONETARY POLICY –TIGHT –EASY

5. TIGHT MONEY FOLLOWED DURING HIGH INFLATION TIMES EASY MONEY FOLLOWED DURING ECONOMIC SLOWDOWNS Increase reserve requirements Decrease reserve requirements Increase interest ratesDecrease interest rates Sell securitiesBuy securities

6. FISCAL POLICY POLICIES OF TAXING AND SPENDING BY THE GOVERNMENT PROBLEM IS MAJORITARIAN POLITICS WANTS BEST OF BOTH –LOW TAXES; LESS DEBT; INCREASED SERVICES WHICH REQUIRES SPENDING

7. ECONOMIC THEORIES MONETARISM –INFLATION OCCURS WHEN TOO MUCH MONEY CHASES TOO FEW GOODS(FRIEDMAN) –INCREASE MONEY SUPPLY AT SAME RATE OF GROWTH

8. ECONOMIC THEORIES KEYNESIANISM –GOVERNMENT SHOULD CREATE THE RIGHT LEVEL OF DEMAND –GOV’T SPEND WHEN DEMAND IS LOW; TAKE MONEY OUT THROUGH TAXES AND CUTS WHEN DEMAND IS TOO HIGH FDR AND NEW DEAL –PRIME THE PUMP; DEFICIT SPENDING

9. ECONOMIC THEORIES SUPPLY SIDE ECONOMICS –LESS GOVERNMENT INVOLVEMENT –LOWER TAXES WILL LEAD TO INVESTMENTS BY THE PRIVATE SECTOR THEREBY INCREASING REVENUE FOR THE GOVERNMENT REAGONOMICS WAS MOSTLY THIS WITH INCREASED MILITARY SPENDING

10. MACHINERY OF ECONOMIC POLICY COUNCIL OF ECONOMIC ADVISORS OFFICE OF MANAGEMENT AND BUDGET(OMB) TREASURY DEPARTMENT (SECRETARY IN PARTICULAR) THE FEDERAL RESERVE CONGRESS-MOST IMPORTANT –APPROVES ALL TAXES AND SPENDING –HAS AUTHORIZATION, APPROPRIATION, AND OVERSIGHT POWERS OVER OTHER TOOLS

11. DESIRES OF VOTERS CAUSE PROBLEMS FOR POLICY POLITICIANS LOOK TO –REDUCE SPENDING TO MANAGE DEBT/DEFICIT –LOOK TO SUPPORT VOTERS’ FAVORITE PROGRAMS

12. FORMS OF TAXES –PROGRESSIVE TAXES THE MORE ONE MAKES, THE MORE ONE PAYS IN TAXES. A HIGHER PERCENTAGE IS CHARGED FOR THOSE THAT MAKE THE MOST MONEY FEDERAL AND STATE INCOME TAXES ARE PROGRESSIVE –REGRESSIVE TAXES PEOPLE PAY THE SAME DOLLAR AMOUNT IT COMES TO HIGHER PERCENTAGE FOR THE LOWER INCOME INDIVIDUALS. IT HURTS THE LOWER INCOME INDIVIDUALS MORE SALES TAXES ARE AN EXAMPLE OF REGRESSIVE TAXES –THE SAME TAX ON A CAR HURTS MR. ADAMS MORE THAN MICHAEL JORDAN. WHY? MR. ADAMS MAKES A LOT LESS THAT JORDAN. –PROPORTIONAL TAXES CHARGES THE SAME PERCENTAGE OF INCOME REGARDLESS OF INCOME ALSO KNOWN AS A FLAT TAX –EVERYBODY PAYS A CERTAIN PERCENTAGE OF THEIR INCOME TO TAXES

13. BUDGET PROCESS OMB BUDGET CEILINGS APPROPRIATIONS CONGRESSIONAL ACTION DISCRETIONARY VS. MANDATORY SPENDING –DISCRETIONARY IS ONLY 1/3 OF THE BUDGET –MANDATORY IS 2/3; ENTITLEMENTS, SOCIAL SECURITY

14. BUDGET REFORM BALANCED BUDGET ACT 1985 –FOUND LOOPHOLES “PAY AS YOU GO” APPROACH