U.S. Government and Civics / Unit 11: State and Local Government and Public Policy
11.6 Economic and Social Policy
Notes
The national government uses two main tools to influence the economy, and it runs large social programs.
- Fiscal policy: Congress and the president use taxing and spending to influence the economy.
- Monetary policy: the Federal Reserve (the central bank) influences interest rates and the money supply. It is designed to be independent of day-to-day politics. Lowering rates tends to encourage borrowing and spending; raising rates tends to slow inflation.
- Deficit: the amount spending exceeds revenue in one year. Debt: the total owed from all past borrowing.
- Social Security: retirement and disability benefits funded by payroll taxes. Medicare: health insurance mainly for people 65 and older. Medicaid: health coverage for people with low incomes, run jointly by the federal government and states.
- Entitlements are benefits that anyone who meets the eligibility rules receives, such as Social Security; they make up most mandatory spending.
| Tool | Who controls it | Examples |
|---|---|---|
| Fiscal policy | Congress and president | Tax cuts, spending programs |
| Monetary policy | Federal Reserve | Raising or lowering interest rates |
Practice
The Federal Reserve raises interest rates to slow rising prices. This is an example of:
The Fed controls monetary policy, including interest rates.
In one year, the government spends more than it collects in revenue. The yearly gap is called the:
The deficit is a one-year shortfall; the debt is the accumulated total.
Which program mainly provides health insurance for Americans 65 and older?
Medicare serves older Americans; Medicaid serves people with low incomes.
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