💶ap macroeconomics review

key term - Congress

Definition

Congress is the legislative branch of the United States federal government, consisting of two houses: the House of Representatives and the Senate. It plays a critical role in shaping fiscal and monetary policy through its power to create laws, approve budgets, and regulate economic activities. This branch has the authority to influence economic conditions by enacting legislation that affects government spending and taxation.

5 Must Know Facts For Your Next Test

  1. Congress has the constitutional authority to create and amend laws related to fiscal policy, directly impacting the economy.
  2. Both houses of Congress must agree on budget proposals before they can be implemented, highlighting the collaborative nature of fiscal decisions.
  3. Congress can influence monetary policy indirectly by confirming Federal Reserve appointments and approving or rejecting key financial legislation.
  4. Changes in tax laws enacted by Congress can lead to shifts in consumer behavior, affecting overall economic activity.
  5. The ability of Congress to enact stimulus packages or austerity measures plays a significant role in responding to economic downturns or booms.

Review Questions

  • How does Congress influence fiscal policy in the United States?
    • Congress influences fiscal policy primarily through its power to create and amend laws regarding government spending and taxation. By drafting budget proposals and deciding on tax rates, Congress can either stimulate or slow down economic growth. This legislative authority enables Congress to respond to changing economic conditions, making fiscal policy a vital tool for managing the economy.
  • Evaluate the relationship between Congress and the Federal Reserve regarding monetary policy.
    • While Congress does not directly implement monetary policy, it plays a crucial role by confirming appointments to the Federal Reserve Board and having oversight over its operations. Congressional hearings often examine the Federal Reserve's actions and policies, allowing members to question how monetary policy decisions impact the economy. This oversight ensures accountability and enables Congress to influence broader economic strategies indirectly.
  • Analyze how changes in tax laws proposed by Congress can affect overall economic performance.
    • Changes in tax laws proposed by Congress can significantly influence overall economic performance by altering disposable income for individuals and businesses. For instance, tax cuts can increase consumer spending, leading to higher demand for goods and services, while tax increases may restrain spending. Furthermore, how Congress structures these tax changes—whether they are temporary or permanent—can also determine their long-term impact on economic growth and stability.