Chapter 16 Flashcards
public policy
a law, rule, statute, or edict that expresses the government’s goals and provides for rewards and punishments to promote those goals’ attainment
public goods
goods or services that are provided by the government because they either are not supplied by the market or are not supplied in sufficient quantities
gross domestic product (GDP)
the total value of goods and services produced within a country
inflation
a consistent increase in the general level of prices
categorical grants
congressional grants given to states and localities on the condition that expenditures be limited to a problem or group specified by the law
Keynesians
followers of the economic theories of John Maynard Keynes, who argued that the government can stimulate the economy by increasing public spending or by cutting taxes
laissez-faire capitalism
an economic system in which the means of production and distribution are privately owned and operated for profit with minimal or no government interference
supply-side economics
an economic theory that posits that reducing the marginal rate of taxation will create a productive economy by promoting levels of work and investment that would otherwise be discouraged by higher taxes
monetary policies
efforts to regulate the economy through the manipulation of the supply of money and credit. America’s most powerful institution in this area of monetary policy is the Federal Reserve Board
Federal Reserve System
a system of 12 Federal Reserve banks that facilitates exchanges of cash, checks, and credit; regulates member banks; and uses monetary policies to fight inflation and deflation
federal funds rate
the interest rate on loans between banks that the Federal Reserve Board influences by affecting the supply of money available
fiscal policy
the government’s use of taxing, monetary, and spending powers to manipulate the economy
tariff
a tax on imported goods
progressive taxation
taxation that hits upper income brackets more heavily
regressive taxation
taxation that hits lower income brackets more heavily
redistribution
a policy whose objective is to tax or spend in such a way as to reduce the disparities of wealth between the lowest and the highest income brackets
loophole
incentive to individuals and businesses to reduce their tax liabilities by investing their money in areas the government designates
budget deficit
amount by which government spending exceeds government revenue in a fiscal year
mandatory spending
federal spending that is made up of “uncontrollables,” budget items that cannot be controlled through the regular budget process
uncontrollables
budgetary items that are beyond the control of budgetary committees and can be controlled only by substantive legislative action in Congress. Some uncontrollables, such as interest on the debt, are beyond the power of Congress, because the terms of payments are set in contracts
discretionary spending
federal spending on programs that are controlled through the regular budget process
monopoly
a single firm in a market that controls all the goods and services of that market; absence of competition
antitrust policy
government regulation of large businesses that have established monopolies
deregulation
a policy of reducing or eliminating regulatory restraints on the conduct of individuals or private institutions
subsidies
government grants of cash or other valuable commodities, such as land, to an individual or an organization; used to promote activities desired by the government, reward political support, or buy off political opposition
