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Ch 10: Praxis Business: Role of the Government in Economics

About This Chapter

Let us help you get ready for the Praxis exam. Use our video lessons and quizzes to review the government's role in economics for your business content knowledge test.

Praxis Business: Role of the Government in Economics - Chapter Summary

Make use of the lessons in this chapter to review essential concepts related to the government's role in economics. The following topics are included in this study:

  • Fiscal policy: Keynesian revolution, tools and effects on unemployment
  • Progressive tax code
  • Automatic stabilizers in economics
  • Using fiscal and monetary policies to manage the economy
  • Federal Reserve and open market operations
  • Reserve ratio's effects on the money supply
  • Monetary policy and the discount rate
  • Banking regulations

This chapter gives you definitions and examples of key concepts about the government's role in our economic system. Complete the short quiz at the end of each lesson to check for understanding.

Praxis Business: Role of the Government in Economics Objectives

This Praxis content knowledge test assesses your understanding of many business-related topics. The portion related to economics comprises about 10% of the test, or approximately 12 questions of the 120-question exam. The questions are multiple-choice, and you may choose to complete the paper or computer-delivered version of the test. Your exam will check for mastery of the following economics topics:

  • Government roles
  • Economic indicators
  • Allocation of resources
  • Various economic systems
  • Types of market structures

Use this chapter to review the role of the government in economics. In addition, look at our other economics chapters for the complete picture. Use the self-assessing quizzes to check for any topics needing more attention before you take the test.

12 Lessons in Chapter 10: Praxis Business: Role of the Government in Economics
Fiscal Policy: The Keynesian Revolution

1. Fiscal Policy: The Keynesian Revolution

In this lesson, you'll learn how the government uses stabilization policy to smooth out the ups and downs of the business cycles. In stark opposition to the Classical approach, this Keynesian approach favors taking immediate action to stabilize a troubled economy.

Fiscal Policy Tools: Government Spending and Taxes

2. Fiscal Policy Tools: Government Spending and Taxes

Discover the three main tools the government uses to address recessionary and inflationary economies - what economists call fiscal policy. Find out how these tools are used to help the economy in different situations.

Fiscal Policy and the Effects on Unemployment

3. Fiscal Policy and the Effects on Unemployment

Review what fiscal policy is and how the two key components of fiscal policy can be used to influence unemployment. Find out when and how fiscal policy can be used and why it is so important.

Understanding the Progressive Tax Code

4. Understanding the Progressive Tax Code

In this lesson, learn what a progressive tax code is, how to recognize it, and what the alternatives are. Then, learn the differences between the three tax codes: progressive, regressive and proportional. Finally, learn how sales tax would impact progressivity.

Automatic Stabilizers in Economics: Definition & Examples

5. Automatic Stabilizers in Economics: Definition & Examples

Watch this lesson to learn about the features that are built into the tax code and the government's budget that help offset declines in aggregate demand during recessions. Referred to as automatic stabilizers, they also address the needs of individuals facing hard times.

Managing the Economy with Fiscal and Monetary Policies

6. Managing the Economy with Fiscal and Monetary Policies

Learn what fiscal and monetary policy are and how they are used to manage the economy. Find out the goals of these policies and some of the tools that each use to help you find a job and influence the amount of money in your pocket.

Open Market Operations & the Federal Reserve: Definition & Examples

7. Open Market Operations & the Federal Reserve: Definition & Examples

This lesson explains the most frequently used monetary policy tool of the central bank, open market operations. Using examples, you'll go inside the formula of the money multiplier and see how the Federal Reserve effectively controls the interest rate of the economy.

How the Reserve Ratio Affects the Money Supply

8. How the Reserve Ratio Affects the Money Supply

Where does our supply of money come from. Well, it's in the hands of the Federal Reserve. In this lesson, discover how the central bank can dramatically alter the supply of money in the economy by changing the reserve requirements of the banks it oversees.

The Discount Rate & Monetary Policy: How Banks Can Borrow Money from the Federal Reserve

9. The Discount Rate & Monetary Policy: How Banks Can Borrow Money from the Federal Reserve

Learn more about the discount rate, which is the rate that banks pay to the central bank when borrowing money. This lesson explains how changes in the discount rate affect the money supply and how the central bank can use the discount rate as part of monetary policy.

How the Federal Reserve Changes the Money Supply and Affects Interest Rates

10. How the Federal Reserve Changes the Money Supply and Affects Interest Rates

Discover the connection between the money supply and economic output and how the central bank's tools lead to an increase or decrease in real GDP via expansionary and contractionary monetary policy.

Safeguards & Controls of Banking Activities

11. Safeguards & Controls of Banking Activities

Money is one of the most highly valued items a person has. Is that money safe when it is deposited in a bank? In this lesson, you'll learn how banks safeguard your money so that you can be confident with every deposit you make.

What is Monetary Policy? - Definition, Role & Effects

12. What is Monetary Policy? - Definition, Role & Effects

National governments have a couple of tools they can use to steer an economy. Monetary policy is one of those tools. In this lesson, you'll learn what monetary policy is and discover its role and its effects. A short quiz follows the lesson.

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