Fiscal vs.Monetary policy
What is the main goal of fiscal policy?
To influence economic activity through government spending and taxation.
What is the role of the Federal Reserve?
To manage the money supply, control inflation, and stabilize the economy.
What does the government do to protect property rights?
It enforces laws and maintains a legal system to uphold ownership and contracts.
What is the purpose of government regulation?
To protect consumers, ensure fair competition, and promote public welfare.
What is a progressive tax?
A tax system where the rate increases as income increases.
Who controls monetary policy in the U.S?
The Federal Reserve.
What type of organization is a sole proprietorship?
A business owned and operated by one person.
What is a contract?
A legally binding agreement between two or more parties.
How do regulations affect competition?
They can prevent monopolies and promote a level playing field.
What services are funded by local taxes?
Schools, police, fire departments, and public parks.
How does increasing government spending affect employment?
It typically increases employment by stimulating demand and production.
How do nonprofits differ from for-profit businesses?
Nonprofits reinvest surplus funds into their mission rather than distributing profits to owners.
Why is enforcing contracts important for the economy?
It builds trust and ensures fair business practices.
What is the role of the FDA?
To ensure the safety and efficacy of food, drugs, and medical products.
What is the difference between federal and state income tax?
The IRS collects federal income tax; individual states collect state income tax and varies by location.
What happens to interest rates when the Fed buys government securities?
Interest rates usually decrease because more money enters the banking system.
What is the function of the SEC?
To regulate and oversee securities markets and protect investors.
What agency enforces antitrust laws?
The Federal Trade Commission and the Department of Justice.
What is a negative externality?
A harmful side effect of an economic activity that affects third parties
What is a sales tax?
A tax on goods and services paid at the point of sale.
Which policy tool is used to combat inflation?
The Fed may raise interest rates or reduce the money supply.
What is a merger?
The combination of two companies into one.
What is intellectual property?
Creations of the mind, such as inventions, literary works, and trademarks, protected by law.
How can regulation improve public health?
By setting safety standards and limiting harmful practices.
How do taxes support infrastructure?
They fund roads, bridges, public transportation, and utilities.