Tiandra Palmer Economics/Section 2
Chapter 16 Outline May 13, 2014
Section 1: The Federal Reserve System
I. Banking History A. The Federal Reserve in American History 1. The central bank of the U.S is the Federal Reserve Sysytem who’s most important task is to be a main spokespersom for this country’s monetary policy. 2. The actions that the Fed takes to influence the level of real GDP and the rate of inflation in the economy is the monetary policy. 3. Deposists that banks keep readily available instead on lending them out are reserves and the reserve requirements were the amount of reserves that banks were required to keep on hand.
II. Federal Reserve Act of 1913 A. Continued Need for Reform 1. The Federal Reserve Board made a contractionary monetary policy. B. A Stronger Fed 1. The new Fed has more centralized powerand because of this regional banks can act consistently with eachother and still represent their own districts’ banking concerns.
III. Structure of the Federal Reserve A. The Board of Governors 1. They are head quartered in Washington, D.C and there are 7 of them. 2. They have 14 year terms and after serving the full term they can’t be reappointed. B. Twelve Federal Reserve Banks 1. The U.S is divided into 12 Federal Reserve Districts with one bank located in each district that have bank monitors and reports on the economic and banking conditions in that district. 2. Each district is also made up of more than one state. C. Member Banks 1. They are state chartered banks that join the Federal Reserve System voluntarily. D. The Federal Open Market Committee 1. Makes the monetary policy decisions 2. 3.
IV. Characteristics of a Good Tax 1. Simplicity – While the tax laws should be simple and easy to understand the taxpayers and businesses need to be able to keep the records and pay taxes on schedule. 2. Efficiency – As government administrators should have the ability to assess and collect taxes without spending a lot of time or money the taxpayers should pay taxes without giving up to much time or paying too much money. 3. Certainty – The taxpayer should know when tax is due, how the tax should be paid, and how much money is due. 4. Equity – No one should bear to much or too little of the tax burden. A. Determining Fairness 1. Economists have 2 ideas on how to measure tax fairness, (A) Benefits Received Principle and (B) Ability to Pay Principle. 2. (A) Benefits Received Principle – People should pay taxes based on the level of benefits that they expect the government to give them. 3. (B) Ability to Pay Principle – People should pay taxes according to their ability to pay. B. Balancing Tax Revenues and Tax Rates 1. Revenue generates enough but not too much so that citizen’s needs are met but the tax can’t discourage production.
Section 2: Federal Taxes
I. Individual Income Taxes A. “Pay-As-You-Earn” Taxation 1. The amount of federal income tax that a person owes is determined on an annual basis. 2. Individuals would usually pay most of their income tax throughout the calendar year as they earn income. B. Tax Brackets 1. Federal income taxes are progressive so that the tax rises with the amount of taxable income. C. Tax Withholding 1. Employers sometimes take payments out of the pay before a person receives it. D. Filing a Tax Return 1. Tax returns are forms used to file income taxes and it’s where you tell your income to the government and figure out how much of that income is taxable. 2. A taxable income is a person’s gross