When you hear politicians mention economic policies, do you understand what they are talking about? If not, it’s important that you learn. Economic policies not only affect government operations and national economies, they affect what goes on around your kitchen table. The more you know about economic policies, the better you will be able to make decisions that affect you personally.
Economic policies are those decisions that dictate how the government handles the various aspects of the national economy. Policies are divided into four separate categories:
- Monetary Policy — U.S. monetary policy relates to controlling how much cash is in the banking system at any point in time. Monetary policy is determined and implemented by the U.S. Federal Reserve system. Cash can be increased or decreased in order to influence inflation, interest rates, and consumer prices.
- Fiscal Policy — The easiest way to define fiscal policy is to say that it guides the way the federal government manages its own budget. Fiscal policy includes how revenues are raised and how money is spent.
- Regulatory Policy — Fiscal regulation at the federal level deals with how the government controls banks, securities, and the like. Regulation always has an impact on the broader economy because it determines how a certain portion of the private sector is allowed to conduct business.
- Judicial Policy — As with regulatory policy, judicial policy has a huge impact on how the private sector does business. The way the government chooses to enforce various laws can have a more pronounced effect on the private sector than monetary and fiscal policy.
The most important thing to understand is that the U.S. economy does not operate in a bubble. Everything done by the federal and state governments has an impact on your budget. It affects how much money you make, how much you pay in taxes, how much you pay for groceries, and so on. This is why it is so important for citizens to pay attention to what the government is doing.