Steven Tsay

AP us gov
3/20 2016
Chapter 15 outline

Through regulation, the US government imposes restraints on business

activity for the purpose of promoting economic efficiency and equity
Through regulatory and conservation policies, the US government seeks to
protect and preserve the environment from the actions of business firms and
consumers
Through promotion, the US government helps private interests achieve their
economic goals
Through its taxing and spending decisions (fiscal policy), the US government
seeks to generate a level of economic supply and demand that will maintain
economic prosperity
Through its money supply decisions (monetary policy), the US government
through the Federal Reserve System (the Fed)seeks to maintain a level of
inflation consistent with sustained, controllable economic growth
1. The public policy process
a. Process that lead to addressing public policy issues
i. Recognize the problem, policy formation, policy implementation
2. Government as regulator of economy
a. Economy: system of production and consumption of goods and services
allocated through exchange
b. Laissez-faire economics: government lower restriction, freedom for
companies
i. Invisible hand that will atomically adjust to the most efficient form
c. Great depression- Keynesians gain traction, government interact more
d. Mix economyleaning for free market, but u.s owns some industries
3. Efficacy through government intervention
a. Maximum output for minimum input
i. Government: reduce negative externalities, payment of damages to
environment
b. Promoting competition
i. Monopoly makes it uncompetitive and inefficient ( positive sum
gain)

ii.
1. Deadweight loss= lost resources, demand not necessary
meets supply perfectly
2. ICC regulate rail monopolies
3. Restoring competition or limiting prices
iii. Economic regulated by federal trade commission and antitrust
division of the justice department
c. Making business pay for indirect goods
i. Inefficiencies result when business did not pay for the full cost of
resource used in production

ii.
iii. Green= deadweight loss

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iv. Clean Air Act of 1963 and the Water Quality Act of 1965 began to
require firms to pay for externalities. Antipollution devices must be
installed
d. Congress 1995 requires regulation has to prove that benefits will outweigh
the cost because of the regulation
Government tries to encourage economic equity- transaction that is fair to each
party
a. Worker right, labor bargain, consumer protection
b. Progressive -Food and drug administration 1907
c. New deal
i. securities and exchange act of 1934
ii. Fair labor standards act of 1938 equality for organized labor,
minimum wage, child labor limited
iii. National Labor Relations Act of 1935- legalize unions
d. Progressive then depression, 1960 1970
i. Director of agencies can be removed by president, so more
responsive
ii. Environmental protection agency
1. In 2001, SC ruled that public health is the only thing that EPA
should take into account in establishing air quality standards;
costs to industry not to be considered
2. In 2007, SC ordered EPA to act on carbon emissions
3.
Environmental protection
a. Yellowstone 1872
b. National park service- department of the interior
c. National forest department of agriculture
i. dual use policy-between valuable natural resources and
conservation of nature and species
d. endangered species act 1973- federal agencies protect threatened species
e. Minerals Management Services (MMS) allowed BP to drill without
complying fully with safety regulations oil spill in gulf of mexico
f. Energy Independence and Security Act enacted by Congress in 2007
established higher fuel-efficiency standards for vehicles and set a goal od
eliminating incandescent light bulbs within a decade
Fiscal policy- democrat support
a. Pump money to system
b. Demand side economics- help increase demand, economy thrive
i. Congress passed $787 billion American Economic Recovery and
Reinvestment Act in 2009
ii. Support of unemployed people
Supply- side policy republican support
a. Cut tax, increase supplies, cost reduce, more jobs
Controlling inflation
a. Gov cut spending or raise taxes, takes money away from consumers and
reduces demand, weakens price of goods, prices drop
Federal reserve board- independent of government
a. Lower or raise cash reserve by buying and selling bonds
b. Interest rate between banks

i. Members appointed by president but not subject to removal, fixed

terms, insulated from political pressure
c.

d.