the national economy
Post on 31-Dec-2015
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The National Economy
Federal Reserve System
I. Economic Indicators
• Show health of the economy– Gross Domestic Product (GDP)
• Value of all goods and services produced in a country• Per Capita GDP = GDP per person
– Standard of Living – Cost to live somewhere comfortably
– Consumer Price Index- Change in price over time
– Employment Rate– National Debt
Tax and Spend Liberals?
II. Federal Reserve System
• Created in 1913 to regulate economy through Money Supply– Privately owned by
members– Fed Chairman
(appointed for 4 year term)
• Ben Bernanke
III. Levers of Control-Monetary Policy
• Sets Reserve Requirement– Low Reserve – Increase money supply (loose)– High Reserve—Decrease money supply (tight)
• Sets Interest Rates– Some rates encourage people to save (tight)– Some rates encourage people to spend (loose)
IV. Meaning?
• The Fed can hit the brake or the gas on the economy– More money in circulation drives the economy
• More spending = More profits, more production, more jobs!
– Less money slows the economy• Less spending=less profits, less production
V. Why would the fed EVER slow the economy???
• Supply and Demand!!! – The more money people have, the less it’s
worth• Loose Monetary Policy usually leads to inflation
(rising prices)• Inflation leads to higher Standard of Living• **Think about a resort town: are prices for everyday
goods higher there? YES! People can afford it
• The Fed’s job is to keep the economy stable-avoid major slowdowns (This means it has to avoid rapid expansion, too)
Who controls the economy?
• Government– Fiscal Policy– Print Money– Taxes– Investment
• Includes tax incentives for businesses
• FED– Monetary Policy– Interest Rates– Reserve Requirement
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