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to get an overall idea of how the economy is going, officials use economic indicators.

indicators are:

market conditions, reports, stock market indices, reports about employment levels, etc.

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involves managing the supply of money and the cost of borrowing to meet the needs of the economy.

Federal Reserve System is responsible for this

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involves using government spending and taxation to influence the economy

The problems

it is often difficult for Congress and the president to enact it quickly

spending to stimulate the economy usually leads to deficits

government spending is difficult to scale back when the economy recovers

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established in 1913

organized as a privately-owned stock corporation.

seven-member Board of Governors supervises

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The Board of Governors major responsibilities for monetary policy:

determines the general money and credit policies of the United States

supervises the operations of the Federal Reserve Banks in the 12 districts across the country

three tools to control the nation’s monetary policy

can raise or lower the discount rate.

can put money into the economy by buying government bonds on the open market.

can raise or lower the reserve requirement for member banks.

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calculated as a percentage of dollars spent to buy goods.

two types:

the general sales tax

the selective sales tax- imposed on a narrower range of items

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most states have individual income taxes and corporate income taxes

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The federal government currently provides about one-quarter of all state revenues.

Federal funds often come to states in the form of federal grants called grants-in-aid

grants influence the states

supply funds for programs that states might not otherwise fund

promote programs and goals that reflect national goals

often set minimum standards for a service in the states

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formal order given by a higher authority, in this case by the federal government.

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largest part of revenue generated by charging for services comes from higher education and health care services provided at state hospitals.

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More than 40 states run public lotteries to raise revenue.

Payments by workers into public employees’ retirement funds are another source of revenue.

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bond- a contractual promise on the part of the borrower to repay a certain sum plus interest by a specified date.

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the most important source of revenue for local governments

collected on real property and personal property.

government property and property used for educational, religious, or charitable purposes are exempt from the property tax.

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Local governments sometimes impose local income taxes, sales taxes, and fines and fees, or operate government-owned businesses to raise additional revenue

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most local governments receive economic aid from state and federal governments in form of grants