Nov. 29

Nov. 29 - Political Science November 29, 2010 Taxation and...

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Political Science November 29, 2010 Taxation and Economic Policy 1. Basic models for organizing an economy a. Free market systems b. Economy and government are tightly integrated 2. Fiscal and monetary policy a. What are the basic tools the government has? a.i. The Fed can determine interest rates which determines demand for a product a.ii. Stimulate spending (building things , invest money, lower taxes a.iii. Government can be spending more than they are taking in with taxes or less that they are taking in with taxes b. Fiscal policy: the use of government spending in combination with tax policy for the purpose of influencing the overall performance of the national economy b.i. Determined by congress tricky to manipulate and often a slow process c. Monetary policy: the use of government’s ability to control the supply and availability of money for the purpose of influencing the overall performance of the national economy c.i. Determined by The Fed c.ii. Responsibility to keep unemployment and inflation under control c.iii. Want it insulated from the political world to make decisions without influence and not thinking their jobs or at risk c.iv. Fed is independent because Congress is protecting itself from itself 3. Techniques of monetary control a. Reserve requirements: the reserves member banks must maintain against their deposits in Federal Reserve banks b. Discount rate: the interest rate at which the Federal Reserve lends money to commercial banks 4. Tax policy a. Tax consumption v. tax income a.i. Should the use of money or the acquisition of money be taxed? a.ii.
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This note was uploaded on 04/01/2012 for the course POLI 100 taught by Professor Rabinowitz during the Fall '07 term at UNC.

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Nov. 29 - Political Science November 29, 2010 Taxation and...

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