POL 321 Lecture 8: Lecture 8

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Lecture 8: Economic Policy
Goals of Economic Policy
Economic Policyall programs & policies designed to improve economic conditions in
the US
Economic Conditionshow we are doing in regard to wealth, resources, & the production
& consumption of goods & services
Economic policy affects all areas, is a major focus
We all have basic needs we need to provide for
5 goals of economic policy: growth, stable prices, positive balance of trade, full
employment, managing the debt & deficit
There is talk that maybe we should look at some more goals
We have people looking for work & jobs available, but aren't matching up in pay, skill, etc.
Gender wage gap is one consideration to study
o Explanations include: preferences, experiences, & discrimination
o For Uber it was preferences and experiences
o Still unclear in the national market
So maybe we should look at equity in the economic policy evaluation
Assessing Goals
Growthto produce more goods & services (each year)
o This is measured by Gross Domestic Product (GDP)total monetary value of all
goods & services (finished) produces in US in a given period
o GDP is currently $19.4 trillion
o GDP is measured by the Bureau of Economic Analysis, which tracks goods &
services
o GDP = C (consumption) + G (government spending) + I (investment) + NX (net
exports)
o Consumptionall private consumer's spending in economy on durable & non-
durable goods
o Government Spendingall government expenditures, including salaries,
construction, & education, but not transfers, such as social security or SNAP;
includes state & local as well
o Investmentsum of country's expenses on capital equipment & new housing
o Net Exportsexports-imports
o GDP isn't always accurate because some of these things are hard to track
o GDP does not include: used goods, black market, intermediate goods (such as Publix
buying sugar to sell), or transfer payments (such as social security)
o We care about GDP because it tells us if an economy is expanding or contracting
o Expanding>additional revenue>increased government benefit spending
o GDP isn't perfect measure:
Assumes all economic activity is good and doesn’t consider l
Ex: rebuilding after a disaster
Doesn’t consider leisure time
Doesn’t adjust for distribution of goods
Doesn’t include pollution
Stable Priceswe want to limit inflation
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