Government and the Economy
Standard(s) of Learning
||The student will demonstrate knowledge of economic systems by
|| evaluating the impact of the government’s role in the economy on individual economic freedoms;
||The student will demonstrate knowledge of the role of government in the Virginia and United States economies by
|| analyzing the impact of fiscal and monetary policies on the economy;
||describing the creation of government provided goods and services that are not readily produced by the market;
||examining environmental issues, property rights, contracts, consumer rights, labor-management relations, and competition in the marketplace.
||understanding the types and purposes of taxation.
Explain that maintaining freedom of choice in the marketplace is the basis of the free-enterprise system. Government plays a limited but important role in the protection of individual economic freedoms.
Identify economic freedoms of individuals:
• Ability to earn money
• Right to purchase property
• Right to spend incomes on goods and services
• Right to make choices about where to save and how much
• Right to choose occupations or change jobs
• Right to open new businesses
Describe the government’s role in protecting economic freedoms:
• The government has created certain consumer protection laws and agencies.
Explain that two major instruments for influencing economic activity are monetary and fiscal policies.
Describe how monetary and fiscal policy influence economic activity:
• The Federal Reserve Board controls monetary policy by changing the availability of loanable funds or adjusting interest rates.
Explain that three instruments of monetary policy are reserve requirements, discount rates, and open-market operations.
Explain that the government can use fiscal policies, which are changes in taxing, changes in spending, and the issue of government bonds to influence economic activity.
Explain that public goods and services, sometimes called collective goods and services, benefit many but would not be available to everyone if individuals had to provide them.
Describe how many public goods and services would not be available if they were not provided by the government.
Explain what are public goods and services.
Describe how taxes pay for the production of public goods and services.
Identify reasons why government provides public goods and services:
• It is more efficient.
• The goods or services may benefit individuals other than the purchaser.
• The value of the goods or services is greater than the individual consumer could afford.
• It promotes economic equity.
Explain how protecting the environment is a public service.
Explain the role of government in protecting property rights:
• Property rights of an individual are relative and limited.
Explain the role of government in the enforcement of legal contracts:
• Contracts are legally binding.
Explain how governmental agencies have been created to protect consumer safety and against fraud and deception:
• Consumer Product Safety Commission—Ensures safety of products other than food, drugs, and cosmetics
• Food and Drug Administration— Ensures the safety of food, drugs, and cosmetics
• The government sets regulations, levies fees, and subsidizes reduction efforts to ensure that the producer pays all costs of pollution.
Individuals have the right of private ownership, which is protected by negotiated contracts that are enforceable by law. However, the rights of a society as a whole rank above those of the individual.
Individuals enter into agreements (contracts) with one another to buy and sell goods and services. Whether written or oral, these agreements are legally binding.
The United States government creates laws and agencies to regulate production and exchange activities, conduct research, and establish guidelines for consumer rights and safety. The government can also intervene in labor-management relations and can regulate competition in the marketplace.
Explain that the government can intervene in labor management relations and can regulate competition in the marketplace.
Below is an annotated list of Internet resources for this organizing topic. Copyright restrictions may exist for the material on some Web sites. Please note and abide by any such restrictions.
Board of Governors of the Federal Reserve System. <http://www.federalreserve.gov/>. This site provides access to information on the Federal Reserve System and its offerings, ranging from personal economics education to news concerning U.S. monetary policy.
Federal Trade Commission for the Consumer. <http://www.ftc.gov/bcp/consumer.shtm>. This site offers publications on consumer rights.
“ Security Council.” United Nations. <http://www.globalpolicy.org/security-council.html>. This site contains information on the membership and operations of the United Nations Security Council. It includes President Bush’s Official Draft of the Plan for Free-Market Economy in Iraq.
United States Environmental Protection Agency. <http://www.epa.gov/>. This site contains information on EPA efforts to fulfill its missions of protecting human health and safeguarding the natural environment.