B full employment 9 iss 225 power authority exchange

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B. Full Employment 9
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ISS 225 – Power, Authority, Exchange Economic Order In the U.S. social and political culture attaches great importance to work and self- reliance. Unemployment creates serious social problems. It also influences the government budget: the unemployed do not pay social security or income taxes and need greater government assistance. Presently, the unemployment rate is higher than it has ever been since the Great Depression. C. Stable Prices As we mentioned, inflation affects citizens through increases in the prices they pay for goods and services. Overall the performance of the American economy in maintaining a stable price level during the postwar period has been better than that of most other industrialized nations. D. A Positive Balance of Payments The balance of payments is the net result of the cost of imports and the cost of exports. If a country spends more money abroad than it receives from abroad, it has a negative balance of payments. In the past decade, the U.S. has had a negative balance of payments E. Structural Change Changing the industrial and regional composition of production. Some regions of a country and some industries (Appalachia, steel industries) may be less developed than others. Governments can help this situation. The U.S. federal government has been relatively little involved in promoting structural change. V. The Instruments of Economic Policy The time when government can ignore the economy is long gone, especially since the Great Depression and the New Deal; government has been actively involved in the economy. Ideal capitalism does not exist. There are many ways in which the government can influence the overall operation of the economy in the United States. A. Regulation and Control Governments regulate because of a belief that markets sometimes fail. Markets may fail in the following ways: 1. essential public goods will not be provided by the market (safety, clean air) 2. information is not perfect (as market theory presumes) Consumers cannot always rely on the free market to give them complete or accurate information. 3. economies of scale (decreasing unit costs of production) Markets won't supply certain things if the demand is low (or cost will be outrageous), example: orphan drugs. 4. Monopoly protection. 10
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ISS 225 – Power, Authority, Exchange Economic Order Independent regulatory commissions are specifically in the regulatory business. Members are appointed to fixed terms, with legislative confirmation. Often require a balance of political party representation. Examples: FCC, FTC, FERC. All regulation contains three basic elements: 1. Bureaucratic agencies typically operate with a large grant of power and set of direction and goals from Congress (which passes the laws requiring the regulation), permitting them to sketch out the regulatory means to a goal.
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