The United States government takes great care to regulate our economy, in hopes of sustaining economic growth and ensuring prosperity. A distressed economy is unlikely to have a greater positive impact on investors, consumers, or corporations than that of a prosperous one. Any increase in our economy’s total output (GDP) will directly correlate with an increase in tax revenue, assuming that tax rates remain stagnant. Maintaining this growth is necessary to provide consistent employment and thus placate a nation’s citizenry. High unemployment would lead to a decrease in consumer spending, economic growth, consumer confidence, and most importantly tax revenue. Therefore, the regulation of a nation’s economy is necessary not only to support government spending and legitimacy, but also the lives of its constituents.
…show more content…
Most recently the Federal Reserve, under chairmen Janet Yellen, has tapered its bond buying process to match current economic conditions with the demand for goods and services. The effect of purchasing bonds can be viewed as introducing currency into the economy, making capital more plentiful, and consequently lowering interest rates. The converse is also true when viewing the sale of treasury bonds. Unlike monetary policy which regulates a nation’s currency, fiscal policy regulates a nation’s expenditures and revenue. Both are useful tools in controlling economic conditions. In times of economic duress countries that actively regulate their economies are likely to spend large sums of money to artificially stimulate their economy. Most often this spending requires the government to run a budget deficit as tax revenue is heavily dependent upon economic conditions, however it should be viewed as an investment in future tax collection. The New Deal of the 1930’s and economic stimulus package of the late 2000’s are prime examples of Keynesian fiscal policy, where large sums of money were invested in the economy to spur growth and resolve
Most recently the Federal Reserve, under chairmen Janet Yellen, has tapered its bond buying process to match current economic conditions with the demand for goods and services. The effect of purchasing bonds can be viewed as introducing currency into the economy, making capital more plentiful, and consequently lowering interest rates. The converse is also true when viewing the sale of treasury bonds. Unlike monetary policy which regulates a nation’s currency, fiscal policy regulates a nation’s expenditures and revenue. Both are useful tools in controlling economic conditions. In times of economic duress countries that actively regulate their economies are likely to spend large sums of money to artificially stimulate their economy. Most often this spending requires the government to run a budget deficit as tax revenue is heavily dependent upon economic conditions, however it should be viewed as an investment in future tax collection. The New Deal of the 1930’s and economic stimulus package of the late 2000’s are prime examples of Keynesian fiscal policy, where large sums of money were invested in the economy to spur growth and resolve