The Role of Government in
the United States Economy
How does the United States
government promote and regulate
competition?
Economic Terms
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Consumers – A person who buys goods and services
Credit – Money that a bank or business will allow a
person to use and then pay back in the future
Deflation – Decrease in the amount of available
money or credit in an economy that causes prices to
go down
Entrepreneur – A person who starts a business and is
willing to risk loss in order to make money
Exports – Goods or services produced in one nation
but sold to buyers in another
Imports – Goods and services bought from sellers in
another nation
Economic Terms Continued
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Inflation – A continual increase in the price of goods
and services
Interest Rates – Price paid for borrowing money,
usually in the form of a percentage
Revenue – Money that is made by or paid to a
business or organization
Stock – A share of the value of a company which can
be bought, sold, or traded
Tariff – A tax on imported goods
What do we have?
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Framers established an outline for the economy in
Article 1, Section 8 in the Constitution
The Framers originally planned for the government
to play a limited role in the country’s economy
Framers established guidelines for a market
economy
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An economy where decisions on investment,
production, and distribution are based upon supply
and demand
Ensures prices are established with a free price
system
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What you buy and do not buy affects your prices!
Role of Government
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The federal government is constantly watching over
the state of the economy through the following
methods:
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Unemployment rate
Number of jobs created each month
Amount of money received from exports
Economy growth is measured by the GDP
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The total dollar value of all final goods and services
produced within the country in a year.
A rising GDP without rising prices means the
economy is growing.
Regulating Currency
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How does the Federal Reserve System
regulates the money supply ?
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The Federal Reserve System (Fed) is the
central bank of the United States.
Federal Reserve banks act as a banker’s
bank by issuing currency and regulating the
amount of money in circulation.
Regulating Currency
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The Federal Reserve System, acting as the
central bank, regulates the money supply.
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To slow the economy, the Federal Reserve
Bank restricts the money supply, causing
interest rates to rise
To stimulate the economy the Fed increases
the money supply, causing interest rates to
decline.
Government Agencies That
Help in our Economy
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Bureau of Economic Analysis (BEA)
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Bureau of Public Debt
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Agency responsible for borrowing money to ensure the
government continues to operate. You can contact them if
you are interested in purchasing government bonds.
Environmental Protection Agency (EPA)
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Provides economic statistics that allow researches and the
public to understand the performance of the Nation’s
economy.
Research and enforce environmental regulations
Federal Financing Bank
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Created to manage federal borrowing
What do you get from the
economy?
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Goods and Services provided by
the government:
interstate highways
 postal service
 national defense
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May not be available if
individuals/private businesses had
to provide them
How does the government pay for
those goods and services?
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Through tax revenue
The 16th Amendment to the Constitution
of the United States of America
authorizes Congress to tax incomes
(personal and business).
 This provided more money for the
government to fund projects that it
needed to pay for so that the U.S.
economy could grow.
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How do tax increases and tax
decreases impact you?
Government tax increases reduce the
funds available for private and
business spending
 Tax decreases increase funds for
private and business spending.
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Consumer Rights
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What rights do you have in our
economy?
Individuals have the right of private
ownership
 Government agencies establish guidelines
that protect public health and safety.
 Consumers may take legal action against
violations of consumer rights.
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