Social and Economic Policy Vocabulary

Deficit

When the government spends more money in a year than it collects in taxes and revenues.

National Debt

The total amount of money the federal government owes as a result of borrowing to cover past deficits.

Gross Domestic Product (GDP)

The total value of all goods and services produced within a country in a given year; a measure of the nation’s economic output.

Laissez

Faire

Keynesian Economics (Keynesianism)

The theory that government should increase spending and cut taxes during recessions to stimulate demand and reduce unemployment.

Economic Planning

The belief that government programs or regulations can improve the economy, such as by setting wage and price guidelines or directing investment.

Supply

Side Economics (Theory)

Monetary Policy

Economic policy controlled by the Federal Reserve; involves changing the money supply and interest rates to influence inflation and employment.

Fiscal Policy

Government policy on taxing and spending, determined by Congress and the president, to influence the economy.

Globalization

The process by which the world’s economies and cultures become increasingly interconnected through trade, technology, and investment.

Entitlements

Programs that provide benefits to people who meet certain qualifications, such as Social Security or Medicare.

Mandatory Spending

Spending required by law that continues automatically, including entitlements and interest on the national debt.

Discretionary Spending

Spending that Congress must approve each year through the budget process, such as for defense or education.

Federal Reserve (The Fed)

The central bank of the United States; manages the money supply, sets interest rates, and promotes stable prices and employment.

Insurance Program

A government program that people pay into and later receive benefits from, regardless of income (for example, Social Security or Medicare).

Assistance Program

A government program that provides benefits to the poor without requiring prior contributions (for example, Medicaid or food stamps).

Means Test

A test to determine if someone qualifies for government assistance based on their income and assets.

Medicare

A federal health insurance program for people 65 and older, regardless of income.

Medicaid

A joint federal–state program that provides health care for low

Social Security

A federal program that provides retirement, disability, and survivor benefits, funded by payroll taxes.

New Deal

Franklin D. Roosevelt’s 1930s programs to combat the Great Depression; expanded the federal government’s role in the economy and welfare.

Great Society

Lyndon B. Johnson’s 1960s programs aimed at ending poverty and racial injustice; included Medicare, Medicaid, and civil rights laws.