Money, Taxes and Fiscal Policy

By Ms. Lane

Our Banking System

• In 1913, Congress and the President passed a law that established the Federal Reserve System.– The Federal Reserve System is the United States’

central banking system– A central bank can lend to other banks in times of

need• The Federal Reserve system created the national

currency we use today.• The Federal Reserve system controls the supply of

money in circulation according to business needs.

The Fed• The Federal Reserve System is commonly called “The Fed”• The Fed is run by a Board of Governors• The Board of Governors are selected by the President of

the USA (Members serve for 14 years)• The Federal Reserve has 12 geographical districts

What services does the Fed provide?

• The Fed:– Is a bank for the US government – Issues paper currency for the US– Serves banks (clears checks, see P. 421 diagram)– Lends money to member banks– Controls the banking system to make sure banks

are following banking rules– Control the money supply & interest rates

What does the Fed do to help an ill economy?

• Review the Federal Reserve monetary policy chart and answer the questions on the chart.

• Complete the assignment sheet to use monetary policy to fix an ill economy.

What is Fiscal Policy?

• Fiscal policy is the use of government spending and revenue collection to influence the economy.

• Refer to your assignment sheet to use your economical skills to fix the ill economy.

What are taxes?

• A tax is a required payment to a local (Phoenix), state (Arizona) or federal (USA) government.

• Taxes give the government funds which it needs to operate programs like police protection, trash pickup, education, defense, paved roads, etc.

• All tax and nontax funds the government receives are called revenue.

• The power to tax is granted in the US Constitution.

Type of Tax Structures

• There are 3 types of tax structures. They are:– Proportional– Progressive – Regressive

• Complete the Tax Time worksheet by– Read about each type of tax structure on pages

360-361.

What type of tax is it?

• Ms. Lane pays 15% in income taxes on her teacher’s salary.

• Bill Gates (founder of Microsoft) pays 40% in income taxes on his salary from his business.

• This tax is:a. Proportionalb. Progressivec. Regressive

What type of tax is it?

• You go to Circle K and buy chips. You pay sales tax on the chips. Larry Fitzgerald from the Arizona Cardinals buys the same chips at the same Circle K and pays the same tax you paid. This tax is:– Proportional– Progressive– Regressive

Study, Review and Quiz

• Go to Quizlet: http://quizlet.com/_cdhta to study for your quiz

• Make sure you complete:– Learn– Scatter– Test

• Go to studyisland.com and take the Money, Federal Reserve, Fiscal Policy & Taxes quiz

• Complete your AFL for this section 6b to 9b• I can summarize the role of fiscal policy in relation to governmental economic policy.• I can analyze the effects of taxation on the economy. • I can identify the functions of money.• I can explain the role of the Federal Reserve System in monetary policy.