created by the president house & senate analyze & recommend changes finally passed by both...
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Government ActionsGovernment Actions
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Created by the President House & Senate analyze & recommend
changes Finally passed by both houses
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Individual Income taxes Corporate income taxes Excise taxes - “Sin” taxes
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Progressive tax – tax burden falls more heavily on wealthy then the poor. › Ex. Income taxes
Regressive tax – tax burden (as a %) falls more on the poor then the wealthy › Ex. Sales tax
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Sales tax Property tax Individual Income tax Excise tax “sin tax” Lottery Bonds Inheritance & Estate Taxes User Fees
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Carried out by legislative & executive branches Includes tax policy & government spending Economic Effect:
› Alter growth rate of GDP Expansionary Policy
› Speed up GDP growth › Tax cut or increase in spending will stimulate
growth and lower unemployment Restrictive Policy
› Raising taxes and/or cutting government spending to slow growth and lower inflation
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Carried out by the Federal Reserve Federal Reserve is part of the
bureaucracy Create policy to counteract actual or
anticipated undesirable changes in the economy
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Controlling the money supply › Increasing or decreasing $ available to
banks› Buying or selling government bonds
Controlling the Fed Fund Rate › Interest rate that they loan money to
banks› If they lower the rate then banks should
lower the interest rates for us.
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Money Supply › Increase the money supply› More money = more borrowing = more
spending = increased GDP, increased employment etc.
Federal Fund Rate › Decrease fed fund rate› Low interest rates = more borrowing = etc.
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Money Supply › Decrease the money supply› Less $ = less borrowing = less business
opportunities = less spending = decreases GDP, inflation,
Federal Fund Rate› Increase the interest rate› Same chain of events