Government Responsibilities in a Market Economy

Vocabulary flashcards summarizing the major terms, laws, economic functions, and historical events related to U.S. government roles in a market economy.

Market Economy

An economic system where supply, demand, and pricing are largely determined by private individuals and businesses with limited government control.

Government Intervention

Actions taken by the public sector—laws, regulations, spending, or taxation—to influence or correct market outcomes.

Laissez-Faire Era (1790s–1860s)

Historical period in the U.S. marked by minimal governmental involvement in economic affairs.

Interstate Commerce Act (1887)

First U.S. federal law to regulate private industry, targeting railroad rates and practices to ensure fair competition.

Sherman Antitrust Act (1890)

Landmark law that prohibits monopolistic business practices and upholds competition in the marketplace.

Great Depression (1930s)

Severe global economic downturn that led to massive unemployment and spurred expanded U.S. government intervention.

New Deal

Set of federal programs and reforms (1933-1939) aimed at economic recovery, relief, and financial regulation during the Great Depression.

Social Security

New Deal program providing retirement, disability, and survivor benefits funded through payroll taxes.

FDIC (Federal Deposit Insurance Corporation)

1933 agency that insures bank deposits, restoring public confidence in the banking system.

SEC (Securities and Exchange Commission)

Federal agency created in 1934 to regulate stock markets and protect investors.

Great Society (1960s)

President Johnson’s initiative expanding welfare programs and targeting poverty, education, and health care.

Medicare

Federal health-insurance program for Americans aged 65+ and certain disabled individuals.

Medicaid

Joint federal-state program providing health coverage for low-income individuals and families.

Reaganomics (1980s)

Economic policy emphasizing tax cuts, reduced government spending, and deregulation to boost growth.

Deregulation

Removal or simplification of government rules and oversight in an industry to encourage competition and efficiency.

Great Recession (2008)

Sharp global economic decline prompting U.S. bailouts of major banks and auto companies.

COVID-19 Stimulus (2020)

Trillions of dollars in federal aid aimed at supporting households, businesses, and state budgets during the pandemic.

Maintain the Legal and Social Framework

Government function that establishes laws, property rights, contract enforcement, and a monetary system to support markets.

Antitrust Laws

Statutes such as the Sherman Act that prevent anti-competitive practices and preserve market competition.

Public Goods and Services

Non-excludable, non-rivalrous goods (e.g., national defense, roads) that markets underprovide, supplied by government.

Externality

Cost or benefit of a market activity borne by third parties; can be negative or positive.

Negative Externality

Uncompensated cost imposed on others (e.g., pollution) that government seeks to reduce through regulation or taxes.

Positive Externality

Unpaid benefit enjoyed by others (e.g., vaccinations) that government may encourage via subsidies or provision.

Economic Stabilization

Government efforts to reduce unemployment and inflation and promote steady growth, often through fiscal or monetary policy.

Income Redistribution

Transfer of income from higher- to lower-earning groups, typically via taxes and welfare programs.

Private Property Rights

Legally protected claims to own, use, and transfer assets, foundational to a functioning market economy.

Intellectual Property (IP)

Legally recognized rights to creations of the mind—patents, trademarks, copyrights, and trade secrets.

Patent

Exclusive right granted to an inventor to make, use, or sell an invention for a set period.

Trademark

Distinctive word, symbol, or design identifying and differentiating a company’s goods or services from others.

Copyright

Legal protection for creators of original tangible works—books, music, art—granting exclusive use and distribution rights.

Trade Secret

Confidential, commercially valuable information (formula, recipe, process) that provides a competitive advantage.

Natural Monopoly

Industry in which high fixed costs make a single firm most efficient, often regulated by government.