Chapter 16: Politics and the Economy Flashcards
Fiscal policy is
Economic policies involving taxing, spending, and deficit levels of the national government
Monetary policy is
Economic policies involving the money supply, interest rates, and banking activity
The Federal Reserve Board (fed) is the
Independent agency in the executive branch of the federal government charged with overseeing the nation’s monetary policy
Inflation is
The rise in the general level of prices, not just the prices of some products
The fed acts to
Limit the supply of money by raising interest rates
Recession
A decline in the general level of economic activity
When a recession threatens, the fed acts to
Expand the money supply and lower interest rates
Gross domestic product (GOP) is
The measure of economic performance in terms of the nation’s total production of goods and services for a year, valued in terms of market prices
Unemployment rate: Percentage of the civilian labor force who are
Not working but who are looking for work or waiting to return to or begin a job
It may be the most important measure of the
Economy’s performance
Mandatory spending
Spending for program commitments made by past congresses
Government spending is the type of
Mandatory Spending Program
Entitlement program
Social welfare programs that provide classes of people with legally enforceable rights to benefits
Examples of entitlement programs
Social Security and Medicare— these accounts for two thirds of all entitlement payments
Payments to the poor and unemployed, welfare, Medicaid, and unemployment insurance account for
Less than one-third of all entitlement spending
Entitlement programs account for
More than 60% of all federal spending
Types of Mandatory Spending Programs are in-kind of
Benefits of a social welfare program that are not a cash payment, including “free” medical care, subsidized housing, and food stamps (Ex: Medicaid and Medicare)
Income Transfer
The government redistributes income from one group to another.
Ex: From the working population to retirees, from the employed to the unemployed, from the taxpayers to the disadvantaged (such as low-income households with dependent children)
International Trade
Import and export
Import
Goods shipped from another country into the U.S
Export
Goods made in the U.S shipped to another country
High imports lead to
Decreased employment in the U.S
High exports create
Increased employment in the U.S
The U.S imports
More than it exports
Imports in automotive and consumer products
Far outweighs exports in these same categories
Deficit
The imbalance in the annual federal budget in which spending exceeds revenues
National debt
The total debt accumulated by the national government over the years
The individual income tax is
A tax on individual’s wages and other earned income, the federal government’s largest source of revenue
Social security tax is
The second-largest source of federal revenue (16.6 %)
The top corporate income tax rate is
21%, but some are able to reduce their taxable income to zero
Progressive taxation
System of taxation in which higher income groups pay a more significant percentage of their income in taxes than do lower income groups
Regressive Taxation
System of taxation in which lower income groups pay a more significant percentage of their incomes in taxes than do higher income groups
Proportional (Flat) Taxation
System of taxation in which all income groups pay the same percentage of their income in taxes
