Economic policy by definition is a means for maintaining economic growth, or the influence that the government has over the growth of the economy, through a means of setting interest rates, level of governmental expenditures, and tax rates. Article 1, Sec 8 and Article 2, Sec 2 of the constitution divide the control of the economic policy between the executive and legislative branches and between the house and the senate as stated control of economic policy. In Article 1, Sec 8 congress has the power to coin, borrow, and print money and the power to regulate commerce with foreign nations, among states, and Native American tribes. In Article 2, Sec 2 the President is given the power to appoint the officers of government, including the secretary of the treasury and gives the President the authority to negotiate the treaties and enforce the laws. The federal government uses the economic policy to influence how wealth is produced and distributed via fiscal policy and monetary policy.
Under Fiscal Policy, the government attempts to manage the economy by controlling the taxing and spending of money. In 1933, the federal government has spent only $4 billion while in 2006 the government spent around $2.7 trillion, which is about $9,000 per person. In today’s economy, state and local governments spend about 1/3 of the income of all Americans with the national government being the biggest spender of them all. Federal spending is funded by a variety of sources, such as the individual income tax, corporate income tax, Payroll receipts, excise taxes, borrowing money, and other sources that include smaller taxes and fees such as admissions to national parks and camping fees in national forests.
Monetary Policy is the second way the government attempts to manage the economy by controlling the money supply, including interest rates. Monetarism is the core element in monetary policy, which is the idea that prices, income, and economic stability reflect growth in the...