How does the american tax system work


Supply and Demand

How supply and demand are the forces that drive the U.S. economy. Supply includes employment and natural resources such as oil. Demand, or personal consumption, drives nearly 70% of the economy. A lot of this occurs during the holiday shopping season, which starts on Black Friday.


Inflation and Deflation

Inflation is what happens when demand is greater than supply, and prices go up. It is very difficult to stamp out, once people begin to expect ever higher prices. That's because they will buy now before prices go up, increasing demand even more. Deflation is the opposite, and occurs when prices fall. This also happens to assets, such as housing prices and stock portfolios.


Fiscal Policy

Fiscal policy is the nearly $4 trillion Federal budget. All the revenue ultimately comes from taxes on your income, so it is important for you to know how it is spent. Fiscal policy can stimulate, guide or depress the economy, but only business can create economic growth. Learn about the budgeting process, including the role of the President, Congress, and the Budget Office (OMB). Find out

about Federal tax policy. Understand the budget deficit, and how ongoing deficits led to the $18 trillion national debt.

 - Federal Reserve Chair Janet Yellen (Photo: Alex Wong/Getty Images)

Monetary Policy

Monetary policy is controlled by the Federal Reserve, which is guided by the Fed Chair, Janet Yellen. The Fed's three key economic controls are the Fed funds rate, the money supply and the use of credit. The primary objective of monetary policy is to control inflation. It's secondary objective is to stimulate the economy. It is also charged with the smooth functioning of the banking system. For this reason, the Federal Reserve Chair is often called the most powerful person on the planet.


Trade Policy

Trade policy affects the cost of imports and exports by regulating trade agreements with other countries. Learn how exchange rates affect trade, the value of the dollar and why the dollar is losing value. Understand trade regulation, including farm subsidies and tariffs, affect inflation. Find out the facts about NAFTA and other trade agreements. Learn about the importance of the World Trade Organization, the Doha round of agreements, and trade disputes.


Category: Taxes

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