Chapter 17: Domestic Policies

Question 1

What is the difference between a recession and a depression?

Answer 1

Recessions are defined by a slowing economy over two quarters with declining GDP loss, and a depression lasts several years with more GDP loss.

Question 2

What happens during economic inflation?

Answer 2

The dollar has less value, therefore prices increase.

Question 3

What is considered a healthy balance of trade?

Answer 3

Exporting more goods and services than importing.

Question 4

What are negative externalities?

Answer 4

The harmful effects of economic activities on third parties.

Question 5

Contrast fiscal and monetary policy when faced with economic growth.

Answer 5

Fiscal policy wants the government to spend and implement tax policies, while monetary policy wants it to affect the supply of money and the level of interest rates.

Question 6

What does the Federal Reserve Board do?

Answer 6

Decide the monetary policies of the U.S., primarily by way of setting the interest rates that banks use to borrow money.

Question 7

Contrast mandatory and discretionary spending.

Answer 7

Mandatory is tied to a formula that automatically provides money to some program or purpose, while discretionary is not and can be changed.

Question 8

What are income taxes?

Answer 8

Taxies levied on the annual incomes of individuals and corporations.

Question 9

What are payroll taxes?

Answer 9

Taxes levied on salaries and wages.

Question 10

What is the difference between regressive and progressive taxation?

Answer 10

Regressive is a system in which lower-income individuals are taxed at a higher rate than those who make more, progressive is the opposite.

Question 11

What is the difference between a budget surplus and a budget deficit?

Answer 11

Surplus is when the government brings in more than it is spending, deficit is the opposite.

Question 12

Define national debt.

Answer 12

The total outstanding debt of the federal government; the sum total of all annual budget deficits and surpluses.

Question 13

What was the Great Recession?

Answer 13

An economic crisis from December 2007 to June 2009 when the bursting of a housing bubble led to a financial crisis and cuts in consumer spending.

Question 14

What are the two types of federal safety net programs?

Answer 14

Social insurance and means-tested programs.

Question 15

What does Social Security do?

Answer 15

Provides income support for the elderly, those with disabilities, and family survivors of working Americans.

Question 16

What does the Earned Income Tax Credit (EITC) do?

Answer 16

Allows low-income individuals with at least one child to claim a credit against taxes owed for or, for some, to receive a direct cash transfer from the IRS.

Question 17

What does the Supplemental Nutritional Assistance Program (SNAP) do?

Answer 17

Helps Americans who fall below a certain income to buy food for themselves and their families.

Question 18

What is the difference between Medicare and Medicaid?

Answer 18

Medicare provides all senior citizens with affordable health insurance, and Medicaid provides health insurance to the poor.

Question 19

What does the Children’s Health Insurance Program (CHIP) do?

Answer 19

Pays for health care services for children in households above the poverty line but below 133% to 400% of the poverty line, depending on the state.

Question 20

What did the Affordable Care Act (ACA) aim to do?

Answer 20

Increase access to health insurance for all Americans and drive down the rising, burdensome cost of health care in the U.S.

Question 21

What are regulations?

Answer 21

Government restrictions on people and businesses; are used to prevent practices deemed unacceptable.

Question 22

What is deregulation?

Answer 22

The process of diminishing regulatory requirements for business.

Question 23

What does the Temporary Assistance to Needy Families (TANF) do?

Answer 23

Provides income and services to poor families via state block grants. Has benefit time limits and a work requirement.