ISS
ISS_225_Lec_8_Economics

2 agencies develop a set of rules often called

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2. Agencies develop a set of rules often called guidelines in consultation with the regulated industry. 3. Implementation: The agency must apply and enforce its rules and guidelines (through court and administrative procedures) Some argue that there is too much regulation. Critics of regulation argue three major points: 1. Regulation raises prices. If producers are faced with expensive regulations, these costs will be passed on to the consumer in the form of higher prices. 2. Regulation distorts market forces, hurting America's competitive position abroad. Other nations may have fewer regulations making American products cost more in the international marketplace, hurting sales in other countries. 3. Regulation does not always work well. Regulations are difficult and cumbersome to enforce. Sometimes they do not achieve the results that Congress intended and they simply create massive bureaucracies. B. Public Support for Business Governments provide a number of direct subsidies to industry. The majority of the direct expenditures benefiting business and industry are for research and development and for the subsidization of credit. The government gives free weather reports and economic information to businesses, has a variety of grants and loans for small businesses, and makes federal credit facilities available for businesses. C. Public Ownership Government corporations provide a service that could be provided by the private sector and typically charges for its services. Examples include the Tennessee Valley Authority, Comsat (sells time-sharing on NASA satellites), Postal Service, Amtrak. Public corporations provide revenue for the government, may be used for regional development (TVA), and promote U.S. foreign trade. D. Incentives 11
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ISS 225 – Power, Authority, Exchange Economic Order Governments can also attempt to influence economic change through providing incentives for desired behaviors. Most incentives become available through the tax system, and are directed primarily at encouraging investment and economic change. The major incentives for structural change in the U.S. economy have been the oil depletion allowance and similar allowances for other depletable natural resources. The allowances permit investors to write off against profits a portion of the investments they made in searching for oil. E. Monetary Policy and the Fed Monetary policy is the manipulation of the supply of money and credit in private hands. The economic theory of monetarism holds that the supply of money is the key to the nation's economic health. Monetarists believe that having too much cash and credit in circulation generates inflation. They advise holding the growth in money supply to the rise in real (after inflation) gross national product. The main agency for making monetary policy is the Federal Reserve Board (FED). Created in 1913 to regulate the lending practices of banks and thus the money supply.
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