JCHS Economics: Fiscal & Monetary Policy Vocabulary

Fiscal Policy

The government (Congress) ability to adjust spending and adjust tax rates to influence the nations economy.

Expansionary Policy

Used by Congress and the Fed to grow the economy during low-growth periods in the business cycle.

Monetary Policy

The actions of the Federal Reserve Bank that can influence the nations economy. Actions include Open Market Operations, Changes to the reserve requirements and changes to the discount rate.

Contractionary Policy

Used by Congress and the Fed to slow the economy during high-growth periods in the business cycle.

Tariffs

A tax imposed by government on imported goods. Used to restrict trade.

Open Market Operations

The buying and selling of government securities in the open market in order to expand or contract the economy.

Debt Ceiling

An upper limit set on the amount of money that the government may borrow.

Reserve Requirements

The amount of money banks must keep on reserve and NOT lend. This number is set by the Federal Reserve Bank and can be adjusted to either contract or expand the economy.

Discount Rate

The interest rate charged by the Federal Reserve Bank. The Fed will raise the discount rate to contract the economy and decrease the discount rate to expand the economy.

National Debt

The total amount of money that the United States federal government owes to creditors. Creditors include individuals, businesses and government.

Property Rights

Laws that indicate how you can control, benefit from and/or transfer property. Strong enforcement encourages economic growth and investment.

Budget Deficit

A status of financial health in which expenditure (spending) exceeds revenue (income).

The Great Recession

The sharp decline in economic activity between December 2007 and June 2009.

Budget Surplus

A status of financial health in which revenue (income) exceeds expenditures (spending).

Eminent Domain

The right of government to take ownership of private property for public use. The current owner does not have to agree to the purchase. Government will pay the current market price.

Public Goods

Services provided by government to include national defense, sewer systems, public parks & education.

Government Securities

A bond (debt obligation) issued by a government authority, with a promise of repayment upon maturity that is backed by said government.

Treasury Bonds

A US Bond that will mature in more than 10 years. The government makes interest payments semi-annually. Bond holders pay federal income tax on interest earned.

Income Inequality

The extent to which income is distributed in an uneven manner among the population.

Revenue

The amount of money received from taxes by the federal government.