ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In the United States, the government influences economic activity through two approaches: monetary policy and fiscal policy. Through monetary policy, the government exerts its power to regulate the money supply and level of interest rates. Through fiscal policy, it uses its power to tax and to spend.

Detailed explanation-2: -The government helps promote business in the form of loans, tax credits, and tax deductions. The government helps promote labor through protective laws that set, among other things, minimum wage requirements, maximum work hours, and safe working conditions.

Detailed explanation-3: -Governments influence the economy by changing the level and types of taxes, the extent and composition of spending, and the degree and form of borrowing. Governments directly and indirectly influence the way resources are used in the economy.

Detailed explanation-4: -Branches of government, including Congress and such entities as the Federal Reserve System, attempt to control the extremes of boom and bust, and of inflation and depression, by adjusting tax rates, the money supply and the use of credit.