Chapter 14: Public Policy and Economics

Question 1

economic policy

Answer 1

decisions a government makes that affect the production, distribution, and consumption of goods: the provision of goods: the flow of income: and the accumulation of wealth.

Question 2

laissez-faire

Answer 2

french for “leave things alone” and the view in economics that government should not interfere in the workings of the economy.

Question 3

socialism

Answer 3

the view in economics that economics decisions making should be completely under the control of political authority.

Question 4

recession

Answer 4

a minor and relatively short period of economic decline

Question 5

depression

Answer 5

a period of serious and sustained economic decline

Question 6

protectionism

Answer 6

opposite of free trade, belief that government should protect American business and industry by restricting the flow of foreign goods into the United States

Question 7

free trade

Answer 7

belief that America’s economic interests are best served by allowing foreign producers to sell their goods without restriction in the United States

Question 8

outsourcing

Answer 8

establishment, by American corporations, of factories and offices in foreign countries to take advantage of cheap labor workers

Question 9

fiscal year

Answer 9

governmental decisions about taxing and spending that affect the economic life of a nation

Question 10

monetary policy

Answer 10

governmental decisions about how much money should circulate in the economy and what the cost of borrowing money, the interest rate, should be

Question 11

Office of Management and Budget (OMB)

Answer 11

an agency in the Executive Office of the President that provides the president with budgetary information and advice and is responsible for compiling the president;s annual budget proposal to Congress.

Question 12

deficit

Answer 12

an excess of government expenditures over revenues

Question 13

debt

Answer 13

the total amount of national government owes to lenders, such as banks, individual and foreign investors, insurance companies, and the variety of financial institutions that purchase government securities.

Question 14

surplus

Answer 14

an excess of government revenues over government expenditures

Question 15

net interest

Answer 15

charges that the government must pay to the public for the use of money borrowed to cover budget deficits and added to the interest paid to the government trust funds to create total interest costs

Question 16

incrementalism

Answer 16

a model of decision making that holds that new polices differ only marginally from existing policies

Question 17

mandatory programs

Answer 17

governmental programs, such as Social Security expenditures, in which spending automatically increases from one year to the next without specific annual appropriations action by Congress

Question 18

social entitlements

Answer 18

programs, such as Social Security and Medicaid, whereby eligible individuals receive benefits according to law

Question 19

fiscal year

Answer 19

the budget and accounting purposes in the national government, the twelve-month period beginning on October 1 and ending on September 30 of the following calendar year

Question 20

authorization

Answer 20

congressional enactment that creates of continues a policy program and the agency administering it

Question 21

appropriation

Answer 21

congressional enactment that funds an authorized program with a specific sum of money

Question 22

line-item veto

Answer 22

most state governors have the power, through which a chief executive, reacting to a bill passed by the legislature, may accept some items in the bill while also rejecting other items in the same bill, The president doesn’t not have this power.

Question 23

balanced budget amenment

Answer 23

a proposal for a constitutional amendment that would require the federal government to operate with a budget in which revenues equaled or exceeded expenditures

Question 24

continuing resolution

Answer 24

legislative action taken by congress to allow spending to proceed at the previous year’s level when congress has not met the deadline for reaching agreement on appropriations for the next fiscal year

Question 25

congressional budget and impoundment control act of 1974

Answer 25

legislation that significantly changed congressional budget procedures by creating budget committees, establishing timetable, changing the fiscal year, placing limits on presidential impoundments, and establishing the congressional budget office

Question 26

Congressional Budget Office (CBO)

Answer 26

a congressional staff unit that provides Congress with budgetary expertise, independent of the president’s budget staff, to help Congress clarify budgetary choices.

Question 27

sequenstration

Answer 27

the process through which the president makes budget cuts in government programs to meet the mandates in law requiring ceilings on specific categories of spending

Question 28

Budget Enforcement Act of 1990

Answer 28

legislation that fundamentally changed budget deficit reduction efforts from the focus on deficit targets contained in Gramm-Rudman-Hollings to a focus on ceilings or caps on specific categories of spending

Question 29

Statutory Pay-As-You-Go Act

Answer 29

law passed in 2010 that requires budget increases to be offset by either reductions elsewhere or increased revenues.