apgov ch16

What is a Market Economy?

An economic system where individuals and corporations own the means of production, and prices are determined by supply and demand.

What is a Command Economy?

An economic system where the government makes all decisions about wages, prices, and production.

What is a Mixed Economy?

An economic system where the government is involved as a regulator, consumer, subsidizer, taxer, employer, and borrower.

How is the unemployment rate measured?

By the Bureau of Labor Statistics (BLS), reflecting the proportion of the labor force actively seeking work but unable to find jobs.

What does inflation refer to?

The rise in prices for consumer goods and the decline in the value of a dollar.

What is the Consumer Price Index?

A key measure of inflation determined by tracking the price of a fixed basket of goods over time.

How does a poor economy affect presidential approval ratings?

A poor economy causes presidential approval ratings to decline.

Which political party tends to tolerate unemployment more?

Republicans.

Which political party is more likely to tolerate inflation?

Democrats.

What is monetary policy?

The manipulation of the money supply to control inflation and interest rates.

What happens when the money supply increases?

Interest rates typically decrease.

Who is the main policymaker for monetary policy?

The Board of Governors of the Federal Reserve System (“Fed”).

What does the Federal Reserve Board set?

Discount rates, reserve requirements, and manages government bond sales.

What is Keynesian Economic Theory?

A theory that government spending and deficits can help stabilize the economy.

What is supply-side economic policy?

A theory advocating for reduced taxes and regulations to stimulate economic growth.

What are the obstacles to controlling the economy?

Policies take time to show effects, and external factors like foreign problems and private company decisions impact the economy.

What does the Food and Drug Administration (FDA) regulate?

Food and drugs sold in the U.S.

What is the role of the Federal Trade Commission (FTC)?

To regulate false and misleading trade practices, including consumer lending.

What does the National Labor Relations Board (NLRB) regulate?

Labor-management relations.

What is collective bargaining?

Union representatives and management negotiating pay and working conditions.

What did the Taft-Hartley Act allow states to do?

Pass “right to work” laws, making union membership non-mandatory in unionized companies.

What are entitlement programs?

Benefits provided by the government regardless of need, such as Social Security and Medicare.

What are means-tested programs?

Programs for individuals below the poverty line, such as Medicaid.

What does the poverty line represent?

The amount a family must spend for an austere standard of living.

Which demographic has high rates of poverty?

Unmarried women.

What is a progressive tax?

A tax system where higher incomes are taxed at higher rates.

What is a regressive tax?

A tax where the poor pay a higher percentage of their income than the rich.

What is the Earned Income Tax Credit (EITC)?

A “negative income tax” providing income to very poor people instead of charging them income tax.

What are transfer payments?

Government benefits given directly to individuals, either as money or in-kind benefits.

What was a major outcome of the Social Security Act of 1935?

It marked the first federal step to help protect people against absolute poverty.

What did Johnson's “War on Poverty” include?

Medicaid, school-aid programs, welfare, and job training programs.

How did Reagan impact welfare programs?

Benefits were reduced, and people were removed from welfare rolls.

What was the main change in welfare by the Personal Responsibility and Work Opportunity Act?

Welfare recipients had to find work within two years, with a five-year lifetime limit.

What replaced AFDC in 1996?

Temporary Assistance for Needy Families (TANF).

What does moral hazard refer to?

The risk that a policy will encourage the very behavior it aims to prevent.

What is monetarism?

The theory that the supply of money is the key to a nation’s economic health.

What is laissez-faire?

An economic policy of minimal government interference in the economy.

What happens if Social Security runs out of money?

Plans include cutting benefits, raising taxes, or raising the retirement age.

Why are programs for the poor less popular than those for the elderly?

Public perception and political priorities.

What is indexing?

Adjusting benefits to account for inflation.

What does Medicare provide?

Health insurance for seniors and certain disabled individuals.

What does Medicaid provide?

Health coverage for low-income individuals.

What is fiscal federalism?

The relationship between federal and state governments in managing finances.

What is the poverty line for a family of three (as of 2008)?

Just over $18,000.

What are austerity measures?

Cuts to social programs in other countries to manage economic challenges.

What does the term “undeserving poor” refer to?

A stigmatized group viewed as not deserving of public assistance.

What is the role of government in a mixed economy?

To regulate, subsidize, tax, employ, and borrow.

What happens if inflation increases?

The value of the dollar decreases.

What is the role of retrospective voters?

To choose candidates based on recent economic performance.

What is the impact of high taxation according to supply-side economics?

It stifles economic growth by reducing incentives to work and invest