American Gov - Chapter 14 and 15

Economy

A system for the exchange of goods and services between the producers of those goods and services and the consumers of them

Gross Domestic Product (GDP)

A statistic that measures all goods and services produced by a nations economy

Laissez-faire Economics

Says that owners of business should be allowed to make their own production and distribution decisions without government regulation or control

- (gov is not involved in the economy at all)

Communism

Says that free-market systems exploit employers because they work for wages below their contributions, while owners of business reap the greatest rewards

- (Sharing with everybody in society)

Socialism

Generally a system with social ownership of means of production -- the society (through the government) plays a huge rule in the economy

Command Socialism

Generally in place under an authoritarian dictatorship there is no place given for the free market to exist (lack of competition)

Market Socialism

Generally in place under a more democratic system -- the free market exists but there may be significant systems under government control (education, healthcare) and potential limits on large profits (such as wealth or corporate tax)

- Systems under government control

Mixed Economics

Main focus is on private firms and transactions, but a substantial role is also given to the government

- Free marker is allowed to exist, but government steps in when needed, usually through regulation (rules)

Fiscal Policy

Fiscal = tax and spending

- policy designed to improve the economy through spending and taxation

Economic Depression

A very severe and sustained economic downtown -- depressions are rarer in the US, last one being in 1930s

Economic Recession

A moderate but sustained economic downtown -- recessions are part of the economy's normal cycle of ups and downs

- When GDP drops in size of two consecutive quarters

Deficit Spending

Situation where the government spends more than it collects in taxes and other revenues -- can happen through the borrowing of money (bonds)

- this can be used to place money in the hands of consumers, which they will spend, which will stimulate production, which will create jobs and improve the economy

Demand Side Economics

Form of fiscal policy that emphasizes 'demand' (consumer spending) -- government can use increases spending or tax cuts to place more money in consumers hand and thereby increase demand

Budget Deficit

Situation where the government is spending more money than its making -- governments expenditures exceed its tax and other revenues

Public Debt (National Debt)

The total amount of money that the federal government owes

Balanced Budget

Situation where the governments tax and other revenues for the year and roughly equal to its expenditures

Budget Surplus

Situation where the governments tax and other revenues are more than the money they are spending

Supply-side Economics

A form of fiscal policy that emphasizes 'supply' (production)

- designed to encourage investment in business and capital markets, creating economic growth that results in new employment and income

- as jobs increase, so does spending and creating economic growth

Capital gains tax

Tax that individuals pay on money gained from the sale of a capital asset, such as property or stocks

- tax you pay on your unearned income