Studied by 4 people
Bear market
A market in which prices are falling, encouraging selling
BUST time
Bull market
Share prices are rising, encouraging buying
BOOM time
Deflation
BAD
Reduction of the general level of prices in an economy, wages and jobs will go down, leads to a recession
Depression
A severe and long lasting decline in the economy that occurs as investment sags, production falls off, and unemployment increases
Deregulation
A policy promoting cutbacks in the amount of federal regulation in specific areas of economic activity
(get rid of restrictions)
Distributive policy
Everyone who participates gets a share
Ex: social security, medicare
Economic regulations
Regulates business, the economy, mitigate the excess of capitalism to bring about justice
Controls the behavior of business in the market place
Environmental regulations
Regulating something that belongs to everyone
Clean Air Act
Incrementalism
Little change to public policies at a time, procedural in nature
Inflation
A rise in the general price levels of goods and services within the economy
Wages and products up, value of money down
Fed target is 2% for sustainable economic growth
Keynesian economics
Idea that spending money can stimulate economic growth much faster that a free market can on its own
Gov steps in and spends money, then pulls out
Laissez-faire
Limited gov role for gov in the economy
Market/demand economy
Decisions regarding investment, production, and distribution are based on supply and demand/what the people want
Prices by free market price
Mixed economy
Gov does some stuff but not everything, only controls/supplies some things
Monetarism
Theory that gov should control the money supply to encourage economic growth and restrain inflation
Planned/command economy
Gov decides what, how much, price of goods, and which of them are sold
Policy agenda
Set of issues to be discussed/given attention
Privatization
Transfer of a business, industry, or service from public to private ownership and control (get gov out)
Public assistance
Wellfare programs (not social security)
Public policy
A specific/international course of action or inaction taken by gov to achieve a public goal or deal with some problem or matter of concern
Punishment for not complying with it
Course of action, important how carried out
Quantitative easing
Fed throws money into the economy (more in circulation) to speed it up
Ended at end of ‘22
Reaganomics
Trickle down and supply side
Real economic growth
How money is changing accounting for inflation
If target is 4% economic growth, but there is 2% inflation, actually need 6% growth
Recession
A decline in the economy that occurs as investment sags, production falls off, and unemployment increases
2 quarters with no economic growth
Redistributive policy
Everyone pays in, but not everyone gets it back
Ex: Most social welfare programs, student loans, Medicaid
Social regulation
Attempts to correct the side effects of economic activity (offset)
Social insurance
Universally funded financial safety net administered by the government
Ex: social security, unemployment insurance, Medicare
Stagflation
Persistent high inflation combined with high unemployment and stagnant demand in an economy (prices go up but wages do not)
Supply-side economics/trickle down
Gov gets involved to help suppliers/businesses
Tax cuts, the notion that tax cuts increase economic growth
Republican approach
Unemployment insurance
Funded by payroll tax by employers
Covers full time employees of companies of 4+ people who have become unemployed by no fault of their own
Welfare reform
Changes in the operation of a given welfare system
Goals of
Reducing the number of individuals dependent on government assistance
Keeping the welfare systems affordable
Assisting recipients to become self-sufficient
W shaped
Used for deficits
Entitlements
Gov benefits which all citizens meeting certain criteria recieve
Means-tested entitlements
Benefits are provided to those whose income falls beneath a certain level
How is public policy made?
By elected officialsE
Elite theory
All societies are divided into elite and masses: the elites have the power to make and implement policy, while the masses respond to the desires of the elites
Bureaucratic theory
Dictates that all institutions, governmental and non, have fallen under the control of a large and ever growing bureaucracy that carries out policy using standardized procedures
Growing complexity of modern organizations has empower bureaucrats, who become dominant.
Special interest theory
Narrow, specialized groups- not elites or bureaucrats- control the gov process
Pluralist theory
Political resources in the US are scattered so widely that no single group or interest could ever gain monopoly control
How is public policy conveyed?
Laws passed by Congress, orders from the Pres, rules and regulations of the bureaucracy, opinions by the courts
What does public policy tell?
Who is about to get what and when and how from the fed gov
On what are public policies based on and to what may that lead?
Competing assumptions about the future (parties)
Problems may look worse than they are
Solutions may seem to work better than they could
Tools available to enact public policy
Spending money
Tax breaks- encourage activity
Provide goods and services directly
Provide protection against risk (college loans)
Enforcing restrictions and penalty
Agenda setting
1
Government recognition that a problem is worthy of consideration for government interest
Forming the list of issues to be addressed
Formulation
2
Identification of alternative approaches
(political & technical aspect, routine, analogous, and creative)
Adoption
3
Selection of policies through means
Implementation
4
Funding and administration
Evaluation
5
Determining if the course of action is achieving goals
Fiscal policy: taxing, ways to adjust to fit the economy
Raise: more money into gov
Lower: keeps money in the economy
Payroll tax (social security and medicare)
Based on percentages
6% ss
1.45% med
Set by Congress
Flatrate or brackets
Income tax (FWI on paycheck)
Federal Withholding Income
Gov relies on, might get some back
Excise tax
Practically nothing
Tax for products is included in the price
Who makes monetary policy?
Non elected officials, fed reserve system
Organization of Federal Reserve
12 regional banks
Supervise money supply and monetary policy
Board of Governors
Fed Chair
FOMC
How is the fed’s board of governors organized and selected?
Chair and 6 other members
Appointed by Pres with Senate approval
14 year terms (1 member up every 2 years)
Fed chair
Appointed by pres
4 year term, can be renewed
Reports to congress twice a year
FOMC: make up
NY reserve bank president + 7 members who are professional economists
4 others that rotate, don’t have a vote (1 year terms)
12 members, 8 voting
Impact of buying and selling government securities
Buying: money goes out of fed and into the economy
Selling: money comes in to the fed and out of the economy
Impact of raising and lowering the discount rate (interest rate)
Raising: slows economy
Lowering: speeds up economy, more money borrowed
Impact of raising and lowering reserve requirements (fed requires banks to have x amount of money)
Raising: slows economy
Lowering: more for bank to give out, speeds up economy
What does the fed review?
Economic situation and organization
What does the fed determine?
Proper monetary policy
What does the fed assess?
The risk to long term goals to price stability and sustainable economic growth
What does the fed target?
2% inflation rate
4% unemployment
4% economic growth
Social Security
SSA as an organization
FICA as a payroll tax
Age has gone up
Who is Social Security for?
Initially elderly/retired, added disability and children/survivors
How is Social Security paid for?
Tax, pay in
Third rail
Don’t touch Social Security
Third rail of domestic policy
Will lose the votes of old people
Medicare age
Has not gone up
Who is Medicare for?
People over 65, some younger people with disabilities
How is Medicare paid for?
National government
General revenues
Payroll tax contributions
Beneficiary premiums
Other sources
What is covered by Medicare?
Cost of hospitals
Doctors
Prescriptions
Dental
Only pays 80%
Strong dollar
Dollar will buy more outside the country, our products become more expensive
Benefits imports
Weak dollar
More expensive to travel, won’t get as much for their money overseas
Others will bring money in, helps exports
Off-shoring
The business stays in the US but the jobs move overseas
Tax inversion/havens
Foreign company buys your company, moves the corporation out of the country but the jobs stay here
Corporate inversion
Corporation moves but the jobs stay
Anti-dumping
Gov gives money to a company so they can sell their products overseas for less than they cost to make
Will drive American companies out of business
Protection of intellectual property (innovation)
We invent something and then another country steals the plans and makes it for cheaper
Protectionist trade property
Country takes steps to limit imports of foreign goods through tariffs/subsides
Strategic/manage trade policies
Gov identifies key industries and enact policies to support growth
Conduct of foreign policy: pres v congress
Pres has almost complete power except: war powers, treaties, purse, approving appointments, etc
State (foggy bottom)
Old name of state dept. location, mentioned if people aren’t happy
Ambassadors
Conducts foreign policy for pres, represents the US in foreign countries
Appointed by the pres
Embassies
US soil in foreign countries
Consulates
Branches of embassies in large countries
Foreign service
Professional diplomats
Passport
Proof of US citizenship, belongs to US gov
Visa
Permission to enter a country
DOD (pentagon)
Department of Defense
Civilian control
Our military is under control of civilians (all the secretaries and pres)
Civilians make policy
Military authority
Chiefs (ex: Army Chief of Staff) coordinate amongst military branches
JCS
Joint Chief of Staff
Chairman of JCS
4 year term, pres picks, top military advisor
DHS
Protecting country from within, internal affairs
DNI
Director of National Intelligence
All intel goes to him, reports to pres
CIA (Langley)
Central Intelligence Agency
Intelligence gathering
NSA (Fort Meade)
National Security Agency
Cyber intel
Note
Flashcard