AMERICAN GOVERNMENT CLASS

Quarter 4 Week 1 GOVERNMENT & THE ECONOMY ASSIGNMENT

Worth 33 Points

Part 1: Vocabulary There are 10 terms this week. Please read the description
and fill out the correct term. (9 points)

Use the Introduction Economic Policy reading page.

VOCAB TERM DESCRIPTION

1. Bonds, Treasury bills, and other promissory notes the government buys and
sells to partially control economic activity.

2. Total amount of goods and services purchased in a specific amount of time.

3. Controlling the supply of money and the cost of credit, to help meet the needs
of the economy.

4. Policies used by the government to expand the money supply to encourage

economic growth or combat inflation.

5. Government authority to control or change the behavior and outcomes of

business.

6. When a country is in a recession for a long period of time.

7. The overall rise in prices of goods and services.

8. The use of government spending and taxation to promote economic stability.

9. Policies used by the government to slow down the economy.

Part 2: Complete all parts. (18 Points)
Use the Inflation and Recession reading page in the classroom.

For the following questions, highlight the correct answer for each question
below. (A, B, or C) (2 points)

1. The government usually responds to inflation by adopting contractionary

policies, such as _______________, _______________, and ______________.

A. decreasing money supply, decreasing government spending, and increasing

taxation.

B. decreasing money supply, increasing government spending, and decreasing

taxation.

C. increasing money supply, decreasing government spending, and increasing

taxation.

2. The government usually responds to a recession by adopting expansionary

policies, such as _________________,_______________, and _______________.

A. decreasing money supply, increasing government spending, and decreasing

taxation.

B. increasing money supply, increasing government spending, and decreasing

taxation.

C. increasing money supply, decreasing government spending, and increasing

taxation.

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3. Read the following scenarios below and highlight the correct answer. Use
the Inflation and Recession reading pages in the classroom. (6 Points)

A. Scenario 1: Over a period of six months, spending money in the economy

slows down due to the stock market crash. Unemployment is on the rise due to
the decline in retail sales and manufactured goods have also decreased.

Question 1: What kind of situation is this? Inflation or Recession

Question 2: What kind of policy should the government take to fight this?

Expansionary or Contractionary

Question 3: Should the government raise or lower interest rates?

Raise or Lower

B. Scenario B: During a three year period in the 80s, the U.S economy saw a
problem where the money supply lost 10% of its previous value. As the money
supply lost value, consumers started to notice that they couldnt afford as many
products as they could in the past. Prices rose steadily during this three year
period.

Question 1: What kind of situation is this? Inflation or Recession

Question 2: What kind of policy should the government take to fight this?

Expansionary or Contractionary

Question 3: Should the government raise or lower interest rates?

Raise or Lower

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4. Answer the following questions below using the Policy Tools reading page,
scroll down to The Federal Reserve System and Raising and Lowering the
Discount Rate in the classroom. (4 Points)

a. What is the Federal Reserve (Fed)?

b. What does the Fed do when the interest rates are low?

c. How does the Fed affect banks when they lower the discount rates?

d. How does the Fed affect banks when they raise the discount rates?

5. The Fed also tells banks they have to keep a certain percentage of their total
assets on hand in the form of cash. This is called the reserve requirement. If the
Federal Reserve INCREASES the reserve requirement, it tells banks they have to
keep a higher percentage of their assets on hand.

Does an increase in the reserve requirement result in more or less money in the
economy? (1pt)
MORE LESS

6. Why might the government increase taxes and decrease government

spending? (1 pts)

A. To put people back to work.

B. To increase consumer spending.
C. To decrease consumer spending.
D. To encourage corporate spending.

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7. See Financing the Government page (2pts)

a. Define progressive tax:

b. Do you think this progressive tax is fair?

8. See Government Spending page. Answer the following two questions. (2 pts)

a. What reason does the government use for spending money it does not have?

b. How does paying interest on the national debt affect the national budget?

Part 3: Analyze the Graph. (3 pts)

1. a. Look at the chart on the left, where does the majority of the revenue
come from for the federal budget? (1pt)
 b. Look at the chart on the right, where does the majority of the spending
go towards? (1pt)

2. Would you increase the income tax of individuals (you) or businesses

(Starbucks) from the revenue side in order to balance the budget? (1pt)

Part 4: Extended Response (3 pts)

In addition to fiscal and monetary policies, the government affects

the economy through regulatory policy. Regulatory policy uses
government authority to control or change some behavior or outcome
in the private sector of the economy. See Government Regulations
page to answer the following questions about climate change.

Overwhelming scientific consensus says human activity is causing global climate change .

A 2013 review found that 97% of more than 11,000 peer-reviewed studies, which
had expressed a position on the cause of climate change, said that humans are
causing global warming.*

* John Cook, Dana Nuccitelli, Sarah A. Green, Mark Richardson, Barbel Winkler, Rob Painting,
Robert Way, Peter Jacobs, and Andrew Skuce, "Quantifying the Consensus on Anthropogenic
Global Warming in the Scientific Literature," Environmental Research Letters, May 15, 2013

1. Should the government regulate businesses in order to protect the

environment? (1 Point)

2. What agencies or acts exist to regulate businesses or oversee corporate

actions? (1 Point)
3. Was this a positive or negative action by the government? Why or why not?
(Basically, do you agree with the statement and subsequent government
regulation? (2 points)