Chapter 13

Question 1

fiscal policy

Answer 1

government policy that attempts to manage the economy by controlling taxing and spending, which affect inflation through lower taxes and less government spending, and unemployment through more government spending.

Question 2

monetary policy

Answer 2

government policy that attempts to manage the economy by controlling the amount of money in circulation.

Question 3

inflation

Answer 3

a rise in the general price level (and decrease in dollar value) owing to an increase in the volume of money and credit in relation to available goods.

Question 4

unemployment

Answer 4

the number of Americans who are out of work but actively looking for a job. It does not include those who have given up.

Question 5

income inequality

Answer 5

the amount of after-tax income that the richest individuals control when compared to the amount the lowest control; measured by the growth in the gap between the two.

Question 6

GDP

Answer 6

Gross Domestic Product- the value of all goods and services produced by an economy during a specific period of time. (like a year)

Question 7

tariff

Answer 7

tax levied on imports to help protect a nation’s industry from foreign competition. Also used to raise revenue.

Question 8

Progressive Tax

Answer 8

tax graduated so that people with higher incomes pay a larger fraction of their income than people with lower incomes.

Question 9

Regressive Tax

Answer 9

Tax whereby people with lower incomes pay a higher fraction of their income than people with higher income. (Collects same percentage on all individuals regardless of income.)

Question 10

OMB

Answer 10

Office of Management and Budget- presidential staff agency that serves as clearinghouse for budgetary requests and management improvements for government agencies. (executive branch)

Question 11

CBO

Answer 11

Congressional Budget Office- An agency of Congress that analyzes presidential budget recommendations and estimates the costs of proposed legislation. (legislative branch)

Question 12

Federal Reserve System

Answer 12

System created by Congress in 1913 to establish banking practices and regulate currency in circulation and the amount of credit available. Consists of 12 regional banks.

Question 13

Federal Funds Rate

Answer 13

The amount of interest banks charge for loans to each other.

Question 14

Laissez-faire economics

Answer 14

A theory that opposed governmental interference in economic affairs beyond what is necessary to protect life and property. (Rep)

Question 15

Keynesian economics

Answer 15

Based on principles of John Maynard Keynes stating that the gov spending should increase during business slumps and curbed during booms. (Dem)

Question 16

protectionism

Answer 16

a policy of erecting trade barriers to protect domestic industry

Question 17

trade deficit

Answer 17

imports exceeds the exports

Question 18

GATT

Answer 18

General Agreement on Tariffs and Trade- An international trade agreement that seeks to lower the barriers to free trade.

Question 19

WTO

Answer 19

World Trade Organization- International organization with more than 130 members that seeks to encourage fair trade by setting rules for fair competition.

Question 20

NAFTA

Answer 20

North American Free Trade Agreement- An agreement signed by US, Canada, and mexico in 1992 to form the largest free trade zone in the world.

Question 21

environmental impact statement

Answer 21

A statement required by federal law from all agencies for any project using federal funds to assess the potential effect of new construction or development on the environment.

Question 22

compliance costs

Answer 22

costs of meeting regulatory reporting requirements. (like building a clean and safe power plant)

Question 23

deregulation

Answer 23

policy promoting cutbacks in the amount of federal regulation in specific areas of economic activity.

Question 24

entitlements

Answer 24

programs that provide benefits to all eligible citizens (like unemployment benefits or disaster relief)

Question 25

means-tested entitlements

Answer 25

Programs like medicade and welfare that applicants have to meet requirements based on need.

Question 26

social safety net

Answer 26

the programs that the federal gov provides to protect against economic and social misfortune.

Question 27

social insurance

Answer 27

programs in which elgibility is based on prior contributions to the gov, usually in form of payroll taxes.

Question 28

Medicare

Answer 28

national health insurance for elderly and disabled

Question 29

Medicaid

Answer 29

federal program that provides medical benefits for low-income people.