Measuring_Economic_Health

Measuring Economic Health Describe the Use of Gross Domestic Product (GDP) to Measure the Business Cycle The Gross Domestic Product (GDP) is what countries use to measure the economic health of the country. According to Investopedia.com (2010)), “The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory,” (para, 1). The business cycle is the level of fluctuation within the economy. There are five stages of the business cycle that are: growth, peak, recession, trough, and recovery (Investopedia.com, 2010). The GDP affects the business cycle because it is equal to a number of factors. First is private consumption and consumer spending in a nation’s economy. The second is government spending. The third is the country’s businesses spending on capital and the fourth is the nation’s total net exports. Describe the Roles of Government Bodies That Determine National Fiscal Policies Fiscal policy is the change in government spending, taxes or incentives for private investments that stimulate or slow down the economy. The country’s economy is balanced by government bureaus who decide national fiscal policies. Interest rates, taxes, and government spending are ways that these bureaus try to deal with regulating the economy. The Internal Revenue Service (IRS) is a department of the American Government that all working Americans are well aware of. This bureau of the government is in charge of making sure that everyone pays their share of taxes. They also help incorporate new tax laws. The Federal Trade Commission (FTC) oversees anti-trust in mergers, credit and loans, and regulate debt collection. The FTC is there to protect citizens from identity theft. According to FTC.gov (n.d.), “The Federal Trade Commission maintains competition in the petroleum industry, and has invoked all the powers at its disposal – including the investigation of possible antitrust violations, the prosecution of cases, the preparation of studies, and advocacy before other government agencies – to protect consumers from anticompetitive conduct and unfair or deceptive acts or practices in the industry. In doing so, the FTC has assembled vast competition policy and enforcement expertise in matters affecting the production and distribution of gasoline.” Explain the Effects of Fiscal Policies on the Economy’s Production and Employment Fiscal policies affect the economy in whichever way the policy is intended. For example, if the economy is booming, the IRS and other law makers with change the tax laws and adjust the taxes the public pays to try to stabilize the economy. The reason for this is try to avoid inflation. Inflation is inevitable; however, government officials feel they need to try to control it as much as possible. If the economy is in a recession, government agencies try to create incentives to get the economy back up again. For example; the government may offer first time home buyers tax breaks when they purchase a home to get people buying to get the economy going. These are things that the government agencies and bureaus do to try and level the economy.