AP US GOV Unit 4 Vocab Review

Laissez-faire economy

economic policy in which governments intrude as little as possible in the economic transactions between citizens and businesses.

Command and control economy

economic policy in which government dictates much of a nation's economic activity, including the amount of production and the price of goods

Mixed Economy

 economic policy in which many economic decisions are left to individuals and businesses, with the government regulating economic activity.

Gross Domestic Product

the total value of goods and services produced by the economy.

Economic Recession

a period of decline in economic activity, typically defined by two consecutive quarters of negative GDP growth.

Unemployment Rate

the percentage of people actively looking for work who cannot find jobs.

Inflation

the rise in the price of goods and services

Consumer Price Index (CPI)

 the cost of a fixed basket of goods and services over time, used to measure the cost of living.

Keynesian Economic Theory

Economic theory holding that the government should spend money when the economy is weak. Spend on public works, payments to citizens. Favored by liberals.

Supply Side Economic Theory

Economic Theory holding that when the economy is weak, the government should cut taxes so the wealthy spend more money and the benefits trickle down to others. Favored by conservatives

Fiscal Policy

The use of the federal budget, through taxes, borrowing and spending to influence the economy.

Monetary Theory

Use the money supply as a tool to influence economic growth and productivity.

Keynesianism

Stimulate the economy during times of economic recession by spending money to encourage economic growth.

Supply-side Theory

Stimulate the economy by cutting taxes to encourage businesses to grow and taxpayers to spend more money.

Monetary Policy

a set of economic policy tools designed to regulate the amount of money in the economy. Involves changing interest rates and the supply of money in the economy.

Federal Reserve System

a board of governors, Federal Reserve Banks, and member banks responsible for monetary policy

Mandatory spending

the government must spend on these items

Medicare

health care for the elderly

Medicaid

health care for the poor

Social Security benefits

mostly for retirees

Discretionary Spending

spending on these items is a choice

Budget

a policy document allocating burden (taxes) and benefits (expenditures)

Deficit

An excess of federal expenditures over federal reserves.

Expenditures

Government spending. Major areas of federal spending are social services and national defense.

Revenues

The financial resources of the government. The four main sources of revenues are: the individual income tax; the Social Security tax; the corporate income tax and excise tax

Incrementalism

A description of the budget process in which the best indicator of this year’s budget is last year’s budget plus a little more.