Unit 6: chapters 17, 18, 19, 20

Question 1

capitalism

Answer 1

an economic system in which individuals and corporations, not the government, own the principle means of production and seek profits. pure capitalism means the strict noninterference of government in business affairs.

Question 2

mixed economy

Answer 2

an economic system in which the government is deeply involved in economic decisions through its role as regulator, consumer, subsidizer, taxer, employer, and borrower. the united states can be considered a mixed economy.

Question 3

multinational corporations

Answer 3

large businesses with cast holdings in many countries. many of these companies are larger than most governments.

Question 4

securities and exchange commission (sec)

Answer 4

the federal agency created during the new deal that regulates stock fraud.

Question 5

minimum wage

Answer 5

the legal minimum hourly wage for large employers, currently $8.25 in maryland, and the federal wage is $7.25.

Question 6

labor union

Answer 6

an organization of workers intended to engage in collective bargaining.

Question 7

collective bargaining

Answer 7

negotiations between representatives of labor unions and management to determine acceptable working conditions.

Question 8

unemployment rate

Answer 8

as measured by the bureau of labor statistics (bls), the proportion of the labor force actively seeking work but unable to find jobs.

Question 9

inflation

Answer 9

the rise in prices for consumer goods. inflation hurts some but actually benefits others. groups such as those who live on fixed incomes are particularly hard hit, while people whose salary increases are tied to the consumer price index but whose loan rates are fixed may enjoy increased buying power.

Question 10

consumer price index (cpi)

Answer 10

the key measure of inflation that relates the rise in prices over time.

Question 11

laissez-faire

Answer 11

the principle that government should not meddle in the economy.

Question 12

monetary policy

Answer 12

based on monetarism, monetary policy is the manipulation of the supply of money in private hands by which the government can control the economy.

Question 13

monetarism

Answer 13

an economic theory holding that the supply of money is the key to a nation’s economic health. monetarists believe that too much cash and credit in circulation produces inflation.

Question 14

federal reserve system

Answer 14

the main instrument for making monetary policy in the united states. it was created by congress in 1913 to regulate the lending practices of banks and thus the money supply. the seven members of its board of governors are appointed to 14-year terms by the president with the consent of the senate.

Question 15

fiscal policy

Answer 15

the policy that describes the impact of the federal budget–taxes, spending, and borrowing–on the economy. unlike monetary policy, which is mostly controlled by the federal reserve system, fiscal policy is almost entirely determined by congress and the president, who are the budget makers.

Question 16

keynesian economic theory

Answer 16

the theory emphasizing that government spending and deficits can help the economy weather its normal ups and downs. proponents of this theory advocate using the power of government to stimulate the economy if it is lagging.

Question 17

supply-side economics

Answer 17

an economic theory, advocated by president reagan, holding that too much income goes to taxes and too little money is available for purchasing and that the solution is to cut taxes and return purchasing power to consumers.

Question 18

protectionism

Answer 18

economic policy of shielding an economy from imports.

Question 19

world trade organization (wto)

Answer 19

international organization that regulates international trade.

Question 20

antitrust policy

Answer 20

a policy designed to ensure competition and prevent monopoly, which is the control of a market by one company.

Question 21

food and drug administration (fda)

Answer 21

the federal agency formed in 1913 and assigned the task of approving all food products and drugs sold in the united states. all drugs, with the exception of tobacco, must have fda authorization.

Question 22

national labor relations act

Answer 22

a 1935 law, also known as the wagner act, that guarantees workers the right of collective bargaining, sets down rules to protect unions and organizers, and created the national relations board to regulate labor management relations.

Question 23

social welfare policies

Answer 23

policies that provide benefits to individuals, particularly to those in need.

Question 24

entitlement programs

Answer 24

policies for which expenditures are uncontrollable because congress has in effect obligated itself to pay x level of benefits to y number of recipients. each year, congress’s bill is a straightforward function of the x level of benefits times the y number of beneficiaries. social security benefits are an example.

Question 25

means-tested programs

Answer 25

government programs available only to individuals below a poverty line.

Question 26

income distribution

Answer 26

the “shares” of the national income earned by various groups.

Question 27

income

Answer 27

the amount of funds collected between any two points in time.

Question 28

wealth

Answer 28

the amount of funds already owned. wealth includes stocks, bonds, bank deposits, cars, houses, and so forth. throughout most of the last generation, wealth has been much less evenly divided than income.

Question 29

poverty line

Answer 29

a method used to count the number of poor people, it considers what a family would need to spend for an “austere” standard of living.

Question 30

feminization of property

Answer 30

the increasing concentration of poverty among women, especially unmarried women and their children.

Question 31

proportional tax

Answer 31

a tax by which the government takes the same share of income from everyone, rich and poor alike–for example, when a rich family pays 20 percent and a poor family pays 20 percent.

Question 32

progressive tax

Answer 32

a tax by which the government takes a greater share of the income of the rich than of the poor–for example, when a rich family pays 50 percent of its income in taxes and a poor family pays 5 percent.

Question 33

regressive tax

Answer 33

a tax in which the burden falls relatively more heavily on low-income groups than on wealthy taxpayers. the opposite of a progressive tax, in which tax rates increase as income increases.

Question 34

earned income tax credit (eitc)

Answer 34

a “negative income tax” that provides income to very poor individuals in lieu of charging them federal tax.

Question 35

transfer payments

Answer 35

benefits given by the government directly to individuals. transfer payments may be either cash transfers, such as social security payments and retirement payments to former government employees, or in-kind transfers, such as food stamps and low-interest loans for college education.

Question 36

social security act of 1935

Answer 36

a 1935 law passed during the great depression that was intended to provide a minimal level of sustenance to older americans and thus save them from poverty.

Question 37

personal responsibility and work opportunity reconciliation act (prwora)

Answer 37

the official name of the welfare reform law of 1996.

Question 38

temporary assistance for needy families (tanf)

Answer 38

once called “aid to families with dependent children,” the new name for public assistance to needy families.

Question 39

immigration

Answer 39

will be added

Question 40

simpson-mazzoli act

Answer 40

will be added

Question 41

social security trust fund

Answer 41

will be added

Question 42

health maintenance organization (hmos)

Answer 42

organizations contracted by individuals or insurance companies to provide health care for a yearly fee. such network health plans limit the choice of doctors and treatments. about 60% of americans are enrolled in hmos or similar programs.

Question 43

national health insurance

Answer 43

a compulsory insurance program for all americans that would have the government finance citizens medical care. first proposed by president harry s. truman, the plan has been soundly opposed by the american medical association.

Question 44

medicare

Answer 44

a program added to the social security system in 1965 that provides hospitalization insurance for the elderly and permits older americans to purchase inexpensive coverage for doctor fees and other expenses.

Question 45

medicaid

Answer 45

a public assistance program designed to provide health care for poor americans. medicaid is funded by both the states and the national government.

Question 46

environmental protection agency (epa)

Answer 46

an agency of the federal government created in 1970 and charged with administering all the government’s environmental legislation. it also administers policies dealing with toxic wastes. the epa is the largest federal independent regulatory agency.

Question 47

clean air act of 1970

Answer 47

the law aimed at combating air pollution

Question 48

water pollution control act of 1972

Answer 48

a law intended to clean up the nation’s rivers and lakes. it requires municipal, industrial, and other polluters to use pollution control technology and secure permits from the environmental protection agency for discharging waste products into waters.

Question 49

endangered species act of 1973

Answer 49

this law requires the federal government to protect actively each of the hundreds of species listed as endangered–regardless of the economic effect on the surrounding towns or regions.

Question 50

superfund

Answer 50

a fund created by congress in the late 1970s and renewed in the 1980s to clean up hazardous waste sites. money for the fund comes from taxing chemical products.

Question 51

global warming

Answer 51

term for the observed century-scale rise in the average temperature of the earth’s climate system and its related effects.

Question 52

north atlantic treaty organization (nato)

Answer 52

created in 1949, an organization whose members include the united states, canada, most western european nations, and turkey, all of whom agreed to combine military forces and to treat war against one as war against all.

Question 53

united nations (un)

Answer 53

created in 1945, an organization whose members agree to renounce war and to respect certain human and economic freedoms. the seat of real power in the un is the security council.

Question 54

foreign policy

Answer 54

a policy that involves choice taking, like domestic policy, but additionally involves choices about relations with the rest of the world. the president is the chief initiator of foreign policy in the us.

Question 55

secretary of defense

Answer 55

the head of the department of defense and the president’s key adviser on military policy; a key foreign policy actor.

Question 56

secretary of state

Answer 56

the head of the department of state and traditionally a key adviser to the president on foreign policy.

Question 57

european union (eu)

Answer 57

an alliance of the major western european nations that coordinates monetary, trade, immigration, and labor policies, making its members one economic unit. an example of a regional organization.

Question 58

joint chiefs of staff

Answer 58

the commanding officers of the armed services who advise the president on military police.

Question 59

central intelligence agency (cia)

Answer 59

an agency created after world war II to coordinate american intelligence activities abroad. it became involved in intrigue, conspiracy, and meddling as well.

Question 60

isolationism

Answer 60

a foreign policy course followed throughout most of our nation’s history, whereby the united states has tried to stay out of the other nation’s conflicts, particularly european wars. isolationism was reaffirmed by the monroe doctrine.

Question 61

containment doctrine

Answer 61

a foreign policy strategy advocated by george kennan that called for the united states to isolate the soviet union, “contain” its advances, and resist its encroachments by peaceful means if possible, but by force if necessary.

Question 62

cold war

Answer 62

war by other than military means usually emphasizing ideological conflict, such as that between the united states and the soviet union from the end of world war II until the 1990s.

Question 63

arms race

Answer 63

a tense relationship beginning in the 1950s between the soviet union and the united states whereby one side’s weaponry became the other side’s goal to procure more weaponry, and so on.

Question 64

détente

Answer 64

a slow transformation from conflict thinking to cooperative thinking in foreign policy strategy and policymaking. it sought a relaxation of tensions between the superpowers, coupled with firm guarantees of mutual security.

Question 65

strategic defense initiative (sdi)

Answer 65

renamed “star wars” by critics, a plan for defense against the soviet union unveiled by president reagan in 1983. sdi would create a global umbrella in space, using computers to scan the skies and high-tech devices to destroy invading missiles.

Question 66

interdependency

Answer 66

mutual dependency, in which the actions of nations reverberate and affect one another’s economic lifelines.

Question 67

tariff

Answer 67

a special tax added to imported goods to raise the price, thereby protecting american businesses and workers from foreign competition.

Question 68

balance of trade

Answer 68

the ratio of what is paid for imports to what is earned from exports. when more is imported than exported, there is a balance-of-trade deficit.

Question 69

organization of petroleum exporting countries (opec)

Answer 69

an economic organization, consisting primarily of arab nations, that controls the price of oil and the amount of oil its members produce and sell to other nations. the arab members of opec caused the oil boycott in the winter of 1973-1974.