Module 11: Domestic Policy

What is inflation?

Rise in the general level of prices

What is a tariff?

A tax on imported goods, intended to discourage actions of other nations + give American companies an advantage.

What is government contracting?

Supports non-government businesses

What is a monopoly? What type of policy eliminates it?

Complete control of a product or service; antitrust policy.

What congressional acts were two early examples of the government's effort to eliminate monopolies?

Sherman Antitrust Act and Interstate Commerce Act

What is deregulation?

The removal of some government controls over a market. This helps reduce requirements to bring products to consumers.

What was the impact of the book "The Jungle"?

Led to the Federal Meat Inspection Act, an example of government regulation.

Monetary vs. Fiscal policy

Amount of money the government spends decided by the Federal Reserve, NOT politicians; amount of money the government spends decided by politicians

What is a welfare state?

Nations with policies to promote and protect the well-being of its citizens.

Where in the Constitution is Congress granted monetary and fiscal power?

Article 1, Section 8

Who has Congress delegated monetary policy to?

the Federal Reserve

How does the government use subsidies?

To promote the governement's desired goals by giving businesses financial support.

What is a redistribution policy?

Attempts to close the gap between the rich and poor, often through taxes.

Regressive vs. Progressive taxation

Results in the poor paying a greater percentage of income; intended to impact the rich more than the poor.

Why is income tax progressive?

It's based on your earnings; increases as your earnings increase.

What are the causes of a budget deficit?

When government spending outpaces revenue. This usually happens during times of war, natural disasters, and rising debt.

Contributory vs. Noncontributory programs

Individuals have paid into the program over time (Social security and medicare); No one has had to pay into programs (Medicaid).

What are in-kind benefits?

Benefits intended to give exact type of help one needs.

How are interest rates used by the federal government to address inflation?

Increases interest rates to discourage borrowing money.

What is the Keynesian perspective on the economy?

Believes that policy can stop or slow recession.

What is the benefit of a bank being part of the Federal Reserve System?

Acts as a lender of last resort for banks.

What is indexing?

Periodically adjusting social benefits or wages to account for increases in the cost of living.