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7. Economic and Budgetary Policy

Study

Chapter 7 is the first substantive (topical) policy chapter in the text, exploring the power of the government to influence the economy. The chapter concentrates on the major economic policy goals: economic growth, low unemployment and inflation levels, positive trade balances, and deficit and debt management. It then discusses fiscal tools (taxing and spending decisions), monetary tools (those used by the Federal Reserve Board), and others before addressing tax policy more directly. The chapter also reviews the federal budget process and how it affects economic policy. The chapter identifies examples of policy successes and failures, as well as future issues and challenges, throughout the chapter. It concludes with some of the major economic challenges faced by the United States and a focused discussion on how to address the budgetary shortfall.