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Business LibreTexts

1.7: Government’s Role in Managing the Economy

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  • Learning Objective

    1. Discuss the government’s role in managing the economy.

    In every country, the government takes steps to help the economy achieve the goals of growth, full employment, and price stability. 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.