AP Gov: Test 10

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