Chapter 18: Economic Policy

Deficit

Result of when the government in one year spends more money than it takes in from taxes

National debt

Total deficit from the first presidency down to the present

Gross domestic product (GDP)

The total of all goods and services produced in the economy during a given year

Monetarist

Belief that inflation occurs when too much money is chasing too few goods

Keynesianism

Belief the government must manage the economy by spending more money when in a recession and cutting spending when there is inflation

Economic planning

Belief that government plans, such as wage and price controls or the direction of investment, can improve the economic

Supply-side theory

The belief that lower taxes and fewer regulations will stimulate the economy

Monetary policy

Managing the economy by altering the supply of money and interest rates

Fiscal policy

Managing the economy by the use of tax and spending laws

Globalization

The growing integration of the economies and societies of the worldinc

Income inequality

The extent to which income is unevenly distributed throughout society

Budget

A document that states tax collections, spending levels, and the allocation of spending among purposes

Fiscal year

Each budget covers a fiscal year, which for the federal government, runs through October 1 through the following September.

Budget resolution

A congressional decision that states the maximum amount of money the government should spend

Mandatory

Money that the government is required to spend by law

Entitlements

A claim for government funds that cannot be changed without violating the rights of claimant

Discretionary spending

Spending that is not required to pay for contracts, interest on the national debt, or entitlement programs such as Social Security

Sequester

Automatic spending cuts