AP GOPO- Chapter 14: Section 4.9 Ideology and Economic Policy

How can Congress impact the federal budget?

By determining government spending, taxation policies, and trading with foreign countries.

What are excise taxes?

Taxes on particular goods or services, like cigarettes or gambling.

What is fiscal policy?

The part of economic policy concerned with government spending and taxation.

What does Keynesian economics advocate?

The government should adjust taxes and spending to manage demand.

What is the multiplier effect?

The economic growth resulting from an increase in spending that produces a greater effect than the amount spent.

How did FDR's New Deal relate to government involvement?

It involved significant government spending on public works to stimulate the economy during the Great Depression.

What do supply-side economists believe?

The government should minimize taxation and regulation to allow free market mechanisms to operate.

What is laissez faire economics?

An approach advocating minimal government intervention in the marketplace.

What is the Sixteenth Amendment?

It allows Congress to levy income taxes.

What is the role of the Internal Revenue Service (IRS)?

Oversees the process of collecting federal taxes.

What is a progressive tax?

A tax rate that increases as a person's income increases.

What kind of tax policies do liberals typically create?

Incentives for purchasing energy-efficient products.

What is a flat tax?

A tax system where everyone pays the same rate.

What do libertarians believe regarding government and taxation?

Government should not force individuals into paying taxes.

Who initiates the federal budget?

The President of the United States.

What does balancing the budget mean?

Spending no more than what the government takes in.

What is monetary policy?

How the government manages the currency's supply and demand.

What causes inflation?

An excess of dollars in circulation, leading to rising prices.

What is the Federal Reserve Board?

The agency that manages the money supply and sets monetary policy.

What is the discount rate?

The interest rate charged to commercial banks for borrowing funds from the Fed.

What is the reserve requirement?

The amount of cash commercial banks must keep on hand.

What are bonds?

Government securities representing a loan made by an investor to the government.

What do conservatives believe about lowering interest rates?

That it will stimulate banks to lend more and boost economic growth.

How does globalization affect economies?

It creates an increasingly interactive world economy.

What is a trade balance?

When a country exports more than it imports.

What is a trade deficit?

When a country imports more goods than it exports.

Can Congress tax exports?

No, it cannot tax exports to encourage American production.

What was the North American Free Trade Agreement (NAFTA)?

An agreement that removed trade barriers between the US, Canada, and Mexico.

What do economic conservatives think about free trade?

They generally favor it, believing it promotes efficiency and growth.

What concerns do laborers have about free trade?

They fear that American jobs may be outsourced.

How can Congress influence trade with foreign nations?

By imposing taxes on imports or negotiating trade agreements.

What is the relationship between supply-side economics and taxation?

It argues for lower tax rates to increase revenue and economic activity.

How did Keynesian economists suggest dealing with low demand?

By reducing taxes and increasing government spending.

What is the effect of a favorable trade balance?

It indicates a strong export market relative to imports.

What is an example of excise tax?

Taxes on specific goods like tobacco or alcohol.

What historical event did FDR's New Deal respond to?

The Great Depression.

What economic principle suggests that more spending generates further economic activity?

The multiplier effect.

What does a progressive tax system aim to achieve?

Individuals with higher incomes pay a higher percentage of tax.

Why do some favor a flat tax?

It applies the same tax rate to all individuals, simplifying the tax system.