Question

1. Explain why and how the United States government became involved in dealing with the economy?
2. How did the farmers react to the economic problems (monopolies being one of the problems).
3. Give examples of how the United States is an imperialist nation.

Answer 1

In United States people believe that economy should be governed by the competing interests of consumers and businesses with less intervention by the government. But even then US Government plays an important role in shaping US economy.

• It promotes economic growth and stability by using fiscal and monetary policy. These policies help to maintain steady growth, low unemployment, and stable prices.
• Fiscal Policy Fiscal policy consists of alterations to tax rates and spending programs. These alterations are proposed and passed by the U.S. Congress and/or the President; as such, they are often subject to political priorities as much as economic ones.When government raises taxes then money moves from consumers to government. This results in reduction in aggregate demand and consumer spending resulting in economic slowdown. On the other hand when government decreases taxes then people spend more. This results in increase in money supply resulting in fast economic growth.Government spending (on military equipment, education, scientific research, and transfer payments, for example) moves money from government to public. This stimulates demand and encourages economic growth. Cuts in government spending have the opposite effect.
• Monetary Policy Monetary policy consists of alterations in the money supply. The central bank of the United States, the Federal Reserve System (often called the Fed), has the sole power to regulate the money supply, and it operates independently of the President and Congress, focusing on economic rather than political concerns. In order to increase money supply interest rates are lowered resulting in more consumer and business spending. This results in pumping money in the economy resulting in economic growth. In order to decrease money supply the interest rates are increased which erodes the excess purchasing power of the people.
• Apart from this government has regulated industries such as utilities. This is done to prevent the creation of monopolies which may charge high price and exploit consumers.
• The government also enforce certain laws related to private property rights.