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Ch 7: The Economy and the US Government

About This Chapter

Use our online video lessons and quizzes to help you understand the Federal Reserve system and other financial aspects of the U.S. economy. Learn about U.S. fiscal policy and more.

The Economy and the U.S. Government - Chapter Summary

In this chapter, our video instructors explain U.S. government spending, taxes, and other aspects of fiscal policy. You'll be introduced to the Federal Reserve and open market operations. This chapter will also discuss examples of automatic stabilizers in economics.

You'll learn about expansionary monetary policy (policy designed to help the economy grow). As you progress through this chapter, you'll study how to slow the economy down, also know as a contractionary monetary policy. After you complete this chapter, you should be able to:

  • Explain what the Federal Reserve system does
  • Define open market operations
  • Understand how the reserve ratio affects the money supply
  • Give examples of fiscal policy tools
  • Discuss expansionary and contractionary monetary policies
  • Explain how fiscal and monetary policies are used to manage the economy

Our online video lessons on the economy and the U.S. government each include a video presentation designed by a professional educator. Each lesson also comes with a self-assessment quiz, so you get an idea of how well you've learned the material as you go. You'll also have access to a written transcript so you can review anything that may have seemed unclear when you watched the video. Clickable links to key words and phrases in the transcript link to text lessons with additional information for more in-depth study. Video lessons are long enough to cover the most important information and vocabulary about each subject, but short enough to keep you engaged.

9 Lessons in Chapter 7: The Economy and the US Government
Test your knowledge with a 30-question chapter practice test
What is the Federal Reserve System?

1. What is the Federal Reserve System?

Have you ever wondered why interest rates go up and down, seemingly at random? Of course you have! Discover what the Federal Reserve is, what its goals are and how those goals are achieved in this introductory lesson explaining the central bank of the United States.

Reserve Requirement, Open Market Operations and the Discount Rate

2. Reserve Requirement, Open Market Operations and the Discount Rate

This lesson outlines the three main tools used by the central bank to conduct monetary policy, including open market operations, required reserves and the discount rate.

Open Market Operations & the Federal Reserve: Definition & Examples

3. 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

4. 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.

Fiscal Policy: The Keynesian Revolution

5. 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

6. 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.

Automatic Stabilizers in Economics: Definition & Examples

7. 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.

Expansionary Monetary Policy: Helping the Economy Grow

8. Expansionary Monetary Policy: Helping the Economy Grow

In this lesson, you'll learn how the central bank helps the economy grow during recessions by increasing the size of the money supply. An overview of the three tools of monetary policy are included as well as the reasons why monetary policy leads to higher economic output.

Contractionary Monetary Policy: Slowing the Economy Down

9. Contractionary Monetary Policy: Slowing the Economy Down

In this lesson, you'll find out more about the central bank's efforts to deal with an overheating economy, what economists call 'contractionary monetary policy.'

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
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Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
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