Final answer:
During the Civil War, the U.S. federal government expanded its role in the economy through taxation, issuing war bonds, and creating a fiat currency called greenbacks. These measures led to an economic boom in the North and a surge in inflation, defining a new active economic role for the government.
Step-by-step explanation:
The prosecution of the Civil War had significant effects on the role of the federal government in the U.S. economy. To finance the war, various measures were undertaken that expanded the government's economic presence. Congress opted to levy taxes on the income of the wealthy and inheritances, impose high tariffs, and pass two National Bank Acts that called for the issuance of war bonds. In addition to these measures, the Legal Tender Act of 1862 led to the creation of paper money known as greenbacks, which were a fiat currency that became legal tender. This increase in the money supply contributed to the boom of the Northern economy, though it also resulted in high inflation.
These steps to secure funding for the war, including the issuing of greenbacks, impacted the United States economy by establishing practices that had long-term effects on the federal government's role in economic affairs. The Civil War thus acted as a catalyst for the federal government to adopt a more active role in economic management, influencing future practices that would shape the U.S. economy.