Governments, Taxes, and Central Banks" demystifies the institutions that shape our economic landscape. Penny Powers examines the three essential roles governments play in the economy: establishing rules, addressing market failures, and pursuing macroeconomic goals. The episode contrasts Keynesian economics with monetarist and classical approaches, exploring how these competing theories influence real-world policies. Penny breaks down fiscal policy through government spending, taxation, and deficit financing, explaining concepts like the fiscal multiplier and Laffer Curve. The episode then examines monetary policy, revealing how central banks use interest rates, open market operations, and quantitative easing to control inflation and support employment. Penny explores central bank independence, the complex relationship between fiscal and monetary policy, and how different countries have developed distinct approaches to economic governance. The episode concludes by connecting these large-scale policies to listeners' personal financial decisions and showing how economic literacy enhances both individual decision-making and civic participation.
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