1. A) The states and their Capitals
  4. B) On Macro- and Microeconomics
  5. C) Explain the differences between macroeconomics and microeconomics.
  6. C) Say what exchange rate policies are practised by different countries.

Since the 1980s, the U.S. has increased the use of neoliberal economic policies that reduce government intervention and reduce the size of the welfare state, backing away from the more interventionist Keynsian economic policies that had been in favor since the Great Depression. As a result, the United States provides fewer government-delivered social welfare services than most industrialized nations, choosing instead to keep its tax burden lower and relying more heavily on the free market and private charities.

The United States's minimum wage is among the lowest in the industrialized world relative to similar per capita economies. Beginning in the latter part of the 20th century this led to a "living wage" movement; this has met success primarily in urban centers, along with a minority of states that have passed legislation increasing wages. When adjusted for inflation median wages in some states have decreased since ' '.

This pared with tax structures found in some areas, such as Utah, where the poor pay more of their income as a total percentage on taxes, i.e. those making below $ 16,000 annually pay 11.4% of their income on taxes while those earning at least $ 280,000 pay 5.5% (because citizens reach the top tax bracket at $ 4,313 for a single person), has led to growing number of poor and a wider gap between the rich. Tax systems constructed along these lines have been called "regressive". [1] [2] Nationally, as of 2005, the top federal tax bracket for a single person is 35% and reached at an income of $ 326,451. [3] When compared to other countries, especially in Europe, America's economy has a high level of social inequality. [4]


The United States is said to have a mixed economy because privately owned businesses and government both play important roles. Indeed, some of the most enduring debates of American economic history focus on the relative roles of the public and private sectors.

The American free enterprise system emphasizes private ownership. Private businesses produce most goods and services, and almost two-thirds of the nation's total economic output goes to individuals for personal use (the remaining one-third is bought by government and business). The consumer role is so great, in fact, that the nation is sometimes characterized as having a "consumer economy."

However, like in all modern economies, there are limits to free enterprise and private ownership. Americans generally agree that some services are better performed by public rather than private enterprise. For instance, in the United States, government is primarily responsible for the administration of justice, education (although there are many private schools and training centers), the road system, social statistical reporting, and national defense. In addition, government often is asked to intervene in the economy to correct situations in which the price system does not work. It regulates "natural monopolies," for example, and it uses antitrust laws to control or break up other business combinations that become so powerful that they can surmount market forces.

Government also addresses issues beyond the reach of market forces. It provides welfare and unemployment benefits to people who can not or will not support themselves, either because they encounter problems in their personal lives or lose their jobs as a result of economic upheaval; it pays much of the cost of medical care for the aged and those who live in poverty; it regulates private industry to limit air and water pollution; it provides low-cost loans to people who suffer losses as a result of natural disasters; and it has played the leading role in the exploration of space, which is too expensive for any private enterprise to handle. All of this is paid for by a system of progressive taxation.

In this mixed economy, individuals can help guide the economy not only through the choices they make as consumers but through the votes they cast for officials who shape economic policy. In recent years, consumers have voiced concerns about product safety, environmental threats posed by certain industrial practices, and potential health risks citizens may face; government has responded by creating agencies which aim to protect consumer interests and promote the general public welfare.

The U.S. economy has changed in other ways as well. The population and the labor force have shifted dramatically away from farms to cities, from fields to factories, and, above all, to service industries. In today's economy, the providers of personal and public services far outnumber producers of agricultural and manufactured goods. As the economy has grown more complex, statistics also reveal over the last century a sharp long-term trend away from self-employment toward working for others.


While consumers and producers make most decisions that mold the economy, government activities have a powerful effect on the U.S. economy in at least four areas. Strong government regulation in the U.S. economy started in the early 1900s; before that date, it was a nearly pure free market economy.

Perhaps most importantly, the federal government guides the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By adjusting spending and tax rates (fiscal policy) or managing the money supply and controlling the use of credit (monetary policy), it can slow down or speed up the economy's rate of growth-in the process, affecting the level of prices and employment .

For many years following the Great Depression of the 1930s, recessions-periods of slow economic growth and high unemployment-were viewed as the greatest of economic threats. When the danger of recession appeared most serious, government sought to strengthen the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending. In the 1970s, major price increases, particularly for energy, created a strong fear of inflation-increases in the overall level of prices. As a result, government leaders came to concentrate more on controlling inflation than on combating recession by limiting spending, resisting tax cuts, and reining in growth in the money supply.

Ideas about the best tools for stabilizing the economy changed substantially between the 1960s and the 1990s. In the 1960s, government had great faith in fiscal policy-manipulation of government revenues to influence the economy. Since spending and taxes are controlled by the president and the U.S. Congress, these elected officials played a leading role in directing the economy. A period of high inflation, high unemployment, and huge government deficits weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity. Instead, monetary policy-controlling the nation's money supply through such devices as interest rates-assumed growing prominence. Monetary policy is directed by the nation's central bank, known as the Federal Reserve Board, with considerable independence from the president and the Congress.

The U.S. federal government regulates private enterprise in numerous ways. Regulation falls into two general categories. Economic regulation seeks, either directly or indirectly, to control prices. Traditionally, the government has sought to prevent monopolies such as electric utilities from raising prices beyond the level that would ensure them reasonable profits. At times, the government has extended economic control to other kinds of industries as well. In the years following the Great Depression, it devised a complex system to stabilize prices for agricultural goods, which tend to fluctuate wildly in response to rapidly changing supply and demand. A number of other industries-trucking and, later, airlines-successfully sought regulation themselves to limit what they considered harmful price cutting.

Another form of economic regulation, antitrust law, seeks to strengthen market forces so that direct regulation is unnecessary. The government-and, sometimes, private parties-have used antitrust law to prohibit practices or mergers that would unduly limit competition. Why did you delete what i had to say!

Since the 1970s, government has also exercised control over private companies to achieve social goals, such as protecting the public's health and safety or maintaining a clean and healthy environment. The U.S. Food and Drug Administration tightly regulates what drugs may reach the market, for example; the Occupational Safety and Health Administration protects workers from hazards they may encounter in their jobs; and the Environmental Protection Agency seeks to control water and air pollution.

Such agencies draw heavy criticism from conservatives, who question the agencies 'efficiency and necessity.

American attitudes about regulation changed substantially during the final three decades of the 20th century. Beginning in the 1970s, policy makers grew increasingly concerned that economic regulation protected inefficient companies at the expense of consumers in industries such as airlines and trucking. At the same time, technological changes spawned new competitors in some industries, such as telecommunications, that once were considered natural monopolies. Both developments led to a succession of laws easing regulation.

While leaders of America's two most influential political parties generally favored economic deregulation during the 1970s, 1980s, and 1990s, there was less agreement concerning regulations designed to achieve social goals. Social regulation had assumed growing importance in the years following the Depression and World War II, and again in the 1960s and 1970s. But during the presidency of Ronald Reagan in the 1980s, the government relaxed rules intended to protect workers, consumers, and the environment, arguing that regulation interfered with free enterprise, increased the costs of doing business, and thus contributed to inflation. Still, many Americans continued to voice concerns about specific events or trends, prompting the government to issue new regulations in some areas, including environmental protection. As of March 2004, it is estimated that compliance with government regulation costs the U.S. economy $ 1.3 trillion a year. [7]

Some citizens, meanwhile, have turned to the courts when they feel their elected officials are not addressing certain issues quickly or strongly enough. For instance, in the 1990s, individuals, and eventually government itself, sued tobacco companies over the health risks of cigarette smoking. A large financial settlement provided states with long-term payments to cover medical costs to treat smoking-related illnesses. The money is mostly spent (or will be spent, as checks are often written in anticipation of payments) for other purposes.

Each level of government provides many direct services. The federal government, for example, is responsible for national defense, backs research that often leads to the development of new products, conducts space exploration, and runs numerous programs designed to help workers develop workplace skills and find jobs. Government spending has a significant effect on local and regional economies-and even on the overall pace of economic activity.

State governments, meanwhile, are responsible for the construction and maintenance of most highways. State, county, or city governments play the leading role in financing and operating public schools. Local governments are primarily responsible for police and fire protection. Government spending in each of these areas can also affect local and regional economies, although federal decisions generally have the greatest economic impact

Overall, federal, state, and local spending accounted for almost 18 percent of gross domestic product in 1997.

Government also provides many kinds of help to businesses and individuals. It offers low-interest loans and technical assistance to small businesses, and it provides loans to help students attend college. Government-sponsored enterprises buy home mortgages from lenders and turn them into securities that can be bought and sold by investors, thereby encouraging home lending. Government also actively promotes exports and seeks to prevent foreign countries from maintaining trade barriers that restrict imports.

Government supports individuals who can not or will not adequately care for themselves. Social Security, which is financed by a tax on employers and employees, accounts for the largest portion of Americans 'retirement income. The Medicare program pays for many of the medical costs of the elderly. The Medicaid program finances medical care for low-income families. In many states, government maintains institutions for the mentally ill or people with severe disabilities. The federal government provides food stamps to help poor families obtain food, and the federal and state governments jointly provide welfare grants to support low-income parents with children.

Many of these programs, including Social Security, trace their roots to the "New Deal" programs of Franklin D. Roosevelt, who served as the US president from ' to 1945. Key to Roosevelt's reforms was a belief that poverty usually resulted from social and economic causes rather than from failed personal morals. This view repudiated a common notion whose roots lay in New England Puritanism that success was a sign of God's favor and failure a sign of God's displeasure. This was an important transformation in American social and economic thought. Even today, however, echoes of the older notions are still heard in debates around certain issues, especially welfare.

Many other assistance programs for individuals and families, including Medicare and Medicaid, were begun in the 1960s during President Lyndon Johnson's (1963-1969) "War on Poverty." Although some of these programs encountered financial difficulties in the 1990s and various reforms were proposed, they continued to have strong support from both of the United States "major political parties. Critics argued, however, that providing welfare to unemployed but healthy individuals actually created dependency rather than solving problems. Welfare reform legislation enacted in +1996 under President Bill Clinton (1993-2001) requires people to work as a condition of receiving benefits and imposes limits on how long individuals may receive payments.

The national debt, more properly known as the federal debt, is one of the most controversial issues in the United States. It is usually expressed as an absolute number, but a more accurate measurement is the ratio of the debt to gross domestic product. Most citizens favor paying off the national debt, though a minority feel this could have negative economic consequences.

The borrowing cap debt ceiling as of 2004 stood at 8.2 trillion. At the current rate of growing indebtedness, this level will be reached sometime in 2005. It is expected that Senate will approve further increase of the cap, sometime before the ceiling is reached.

The size of the debt is in the trillions and consequently it has been part of popular culture to parody the growing debt with some type of doomsday clock, graphically showing the growing indebtedness every second.

Whilst it is true that the national debt is the largest in the world, and growing larger every second, it is also true that the economy as a whole is also the largest in the world and growing every second.

As a result, the ratio of debt to GDP compares quite favorably to say, Japan.


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