Question

1) How is the American government involved in the economy?

Answer 1

1. The American government guides the overall pace of economic activity. Its goal is to maintain steady growth, high levels of employments and price stability. It is best achieved by adjusting spending and tax rates ( fiscal policy ), managing the money supply and controlling the use of credit ( monetary policy ). The government can slow down or speed up the country's economy's rate of growth which affects the level of prices and employment. Another role of the government in the economy is to correct market's failures, provide public goods and enforce competition.

2. During the recession that followed the Great Depression for example, the government cut taxes to curb competition and increased the money supply  via the control of interest rates. During a financial crises in any given time, the government tried to guarantee secure loans, bail out some troubled banks and adjust the money supply.

3. The federal budget has an affect on jobs, investments, economic growth and the standards of living of ordinary people. Tax cuts benefit many companies and individual businesses, and so do interest rates. Governmental investments in infrastructure and various projects ( education, health care ) have a direct affect on ordinary people, as the level of governmental spending on them reflects the level of services provided and received.