1. Copyright © 2011 Pearson Education, Inc. Publishing as Longman

2. Chapter 18: Making Economic Policy An Introduction to Economic Policy Fiscal Policy Monetary Policy Promoting the Economy Regulating the Economy The Deregulation Movement

3. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Chapter Outline and Learning Objectives An Introduction to Economic Policy LO 18.1 Describe the federal government’s economic policy making role and how economic performance is measured. Fiscal Policy LO 18.2 Outline the way in which the federal government makes fiscal policy and the role of fiscal policy.

4. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Monetary Policy 18.3 Outline the way in which the federal government makes monetary policy and the role of monetary policy. Promoting the Economy 18.4 Identify ways in which the federal government seeks to promote economic growth. Chapter Outline and Learning Objectives

5. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Regulating the Economy 18.5 Categorize ways in which the federal government seeks to regulate the economy. The Deregulation Movement 18.6 Evaluate the advantages and disadvantages of the deregulation movement. Chapter Outline and Learning Objectives

6. An Introduction to Economic Policy LO 18.1 Describe the federal government’s economic policy making role and how economic performance is measured. An Introduction to Economic Policy The framers did not concentrate economic policy in any one branch. By creating a national government of limited powers and providing constitutional guarantees to protect property from excessive regulation, the framers succeeded in protecting capitalism. We use two yardsticks to measure the performance of the economy. LO 18.1 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

7. Fiscal Policy Where the Money Comes From Where the Money Goes Fiscal Policy LO 18.2 Outline the way in which the federal government makes fiscal policy and the role of fiscal policy. LO 18.2 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

8. Fiscal Policy Fiscal Policy (cont.) The Budget Process Tax Expenditures LO 18.2 Back to learning objectives

9. LO 18.2 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

10. LO 18.2 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

11. LO 18.2 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

12. LO 18.2 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

13. The Politics of Taxing and Spending Taxes promote economic growth and reward certain types of behavior. As much as taxpayers complain about taxes most taxpayers want more of virtually everything the federal government provides. Fiscal Policy LO 18.2 Back to learning objectives

14. Monetary Policy 18.3 Outline the way in which the federal government makes monetary policy and the role of monetary policy. Monetary Policy Monetary policy is the second way the federal government manages the economy. Advocates of aggressive monetary policy contend that the money supply is the key factor affecting the economy’s performance. LO 18.3 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

15. The Federal Reserve System Monetary policy is not made by Congress or the president. The Fed has several basic tools for influencing the economy. The rate goes up and down through decisions by the Federal Reserve Board. Monetary Policy LO 18.3 Back to learning objectives

16. LO 18.3 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

17. Government and Economic Policy The Great Depression of the 1930s tested competing theories about helping the economy. Monetary Policy LO 18.3 Back to learning objectives

18. Promoting the Economy 18.4 Identify ways in which the federal government seeks to promote economic growth. Promoting the Economy Promoting Economic Growth Promoting International Trade LO 18.4 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

19. Promoting the Economy The World Trade Organization The North American Free Trade Agreement Promoting the Economy LO 18.4 Back to learning objectives

20. Regulating the Economy 18.5 Categorize ways in which the federal government seeks to regulate the economy. Regulating the Economy Regulating Corporations Regulating Competition LO 18.5 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

21. Regulating the Economy Regulating the Use of Labor Regulating Corporate Markets Protecting the Environment Regulating the Economy LO 18.5 Back to learning objectives

22. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Corporate Responsibility Many corporations have been dealing with the increased pressure to be more responsible. Corporate social responsibility: Efforts by corporations to improve their reputations by paying attention to their contributions to the social good. Regulating the Economy LO 18.5 Back to learning objectives

23. The Deregulation Movement 18.6 Evaluate the advantages and disadvantages of the deregulation movement. The Deregulation Movement Deregulation is a policy promoting cutbacks in the amount of federal regulation in specific areas of economic activity. During the past generation, airlines, trucking, and railroads have been granted considerable freedom in conducting their operations. LO 18.6 Back to learning objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

24. A Continued Federal Role Members of Congress and the president understand that the federal government must be active in the economic life of the nation. Citizens exert a great deal of influence on economic policy. The Deregulation Movement LO 18.6 Back to learning objectives

25. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Which of the following is NOT part of the normal business cycle? A.Expansion, in which the economy produces new jobs and growth B.Contraction, as the economy starts to slow down C.Recession, in which the economy reaches a trough of slow growth D.Depression, an extremely deep form of recession that lasts much longer than the average recession LO 18.1 Back to learning objectives

26. Copyright © 2011 Pearson Education, Inc. Publishing as Longman A.Expansion, in which the economy produces new jobs and growth B.Contraction, as the economy starts to slow down C.Recession, in which the economy reaches a trough of slow growth D.Depression, an extremely deep form of recession that lasts much longer than the average recession Which of the following is NOT part of the normal business cycle? LO 18.1 Back to learning objectives

27. Copyright © 2011 Pearson Education, Inc. Publishing as Longman The greatest proportion of public spending goes to ___________________. A.Human resources B.Military expenditures C.Interest on the debt D.Foreign aid LO 18.2 Back to learning objectives

28. Copyright © 2011 Pearson Education, Inc. Publishing as Longman A.Human resources B.Military expenditures C.Interest on the debt D.Foreign aid The greatest proportion of public spending goes to ___________________. LO 18.2 Back to learning objectives

29. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Monetary policy is made by ___________________. A.president B.Congress C.Federal Reserve D.courts LO 18.3 Back to learning objectives

30. Copyright © 2011 Pearson Education, Inc. Publishing as Longman A.president B.Congress C.Federal Reserve D.courts Monetary policy is made by ___________________. LO 18.3 Back to learning objectives

31. Copyright © 2011 Pearson Education, Inc. Publishing as Longman The ______has conducted eight rounds of negotiations during the past six decades, all of which have amended the General Agreement on Tariffs and Trade (GATT) to encourage free trade. A.North Atlantic Trade Association B.World Trade Organization C.European Common Market D.Organization of the Petroleum Exporting Countries LO 18.4 Back to learning objectives

32. Copyright © 2011 Pearson Education, Inc. Publishing as Longman A.North Atlantic Trade Association B.World Trade Organization C.European Common Market D.Organization of the Petroleum Exporting Countries The ______has conducted eight rounds of negotiations during the past six decades, all of which have amended the General Agreement on Tariffs and Trade (GATT) to encourage free trade. LO 18.4 Back to learning objectives

33. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Which of the following helps to regulate business activities that may create unfair advantages? A.Regulating Corporations B.Regulating Competition C.Regulating the Use of Labor D.Protecting the Environment E.All of these LO 18.5 Back to learning objectives

34. Copyright © 2011 Pearson Education, Inc. Publishing as Longman A.Regulating Corporations B.Regulating Competition C.Regulating the Use of Labor D.Protecting the Environment E.All of these Which of the following helps to regulate business activities that may create unfair advantages? LO 18.5 Back to learning objectives

35. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Deregulation has been greatest in which of the following industries? A.Automobile B.Oil and gas C.Airline D.Steel LO 18.6 Back to learning objectives

36. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Deregulation has been greatest in which of the following industries? A.Automobile B.Oil and gas C.Airline D.Steel LO 18.6 Back to learning objectives

37. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Text Credits 482: From “Obama More Popular Abroad Than at Home, Global Image of U.S. Continues to Benefit” July 2010, by Pew Global Attitudes Project. Copyright (c) 2010 by Pew Global Attitudes Project, a project of the Pew Research Center. Reprinted with permission. 493: From “Board Diversity” by Susan Williams in Investor Responsibility Resource Center, Background Report A. Copyright (c) 2010 by Institutional Shareholder Services Inc. Reprinted with permission.

38. Copyright © 2011 Pearson Education, Inc. Publishing as Longman 478: UPI/Landov 481: (left) AP Photo 481: (right) Paul Sakuma/AP Photo 485: AFP/Getty Images 487: M. Spencer Green/AP Photo 488: Topham/The Image Works 489: (top) Jose Fuste Raga/Corbis 489: (bottom) Nicki Nikoni/Getty Images 490: Brian Lee/Corbis 491: Rick Wilking/Reuters/Landov 494: (top) Konrad Steffen/University of Colorado/Reuters/Landov 494: (bottom) Don Emmert/AFP/Newscom 496: Landon Nordeman/Getty Images Photo Credits