Ap gov chapter 15 economy

Public policy

A law, rule, stature, or edict that expresses the governments goals and provides for rewards and punishments to promote their attainment

Full employment

The theoretical point at which all citizens who want to be employed have a job

Economic depression

A deep, widespread downturn in the economy, like the Great Depression of the 1930’s

Fiscal policy

Decisions the government makes about how to influence the economy by taxing and spending (Congress)

Monetary policy

Decisions the government makes about how to influence the economy using control of the money supply and interest rates (Banking committees)

Council of economic advisors (CEA)

A group of economic advisors, created by the Employment act of 1946, that provides objective data on the state of the economy and makes economic policy recommendations to the president

Inflation

The increase in the prices of consumer goods overtime

Deflation

A decrease in the general prices of goods an services

Gross domestic product (GDP)

The value of a country’s economic output take as a whole

Balanced budget

A spending plan in which the government’s expenditures are equal to its revenue

Budget deficit

The amount by which a government’s spending in a given fiscal year exceeds its revenue

Current account

The balance of a country’s receipts and its payments in international trade and investment

Trade deficit

A measure of how much more a nation imports than it exports

Budget making

The precesses carried out in Congress to determine how government money will be spent and revenue will be raised

Budget reconciliation

The process by which congressional committees are held to the spending targets specified in the budget resolution. During this process, the House and Senate Budget Committees combine the budgetary changes from all the legislative committees into an omnibus reconciliation bill to be approved by Congress

United States Trade Representatives (USTR)

An agency founded in 1962 to negotiate with foreign governments to create trade agreements, resolve disputes, and participate in global trade-policy organizations. Treaties negotiated by the USTR must be ratified by the Senate

National Economic Council (NEC)

A group of economic advisors created in 1993 to work with the president to coordinate economic policy

Federal Reserve System

An independent agency that serves as the central bank of the United States to bring stability to the nation’s banking system

Treasury Department

A cabinet-level agency that is reasonable to managing the federal government’s revenue. It prints currency, collects taxes, and sells government bonds.

Federal Reserve Board

The group of seven presidential appointees who govern the Federal Reserve System

Keynesian economics

The theory that governments should use economic policy, like taxing and spending, to maintain stability in the economy

Supply-side economics

The theory that lower tax rates will stimulate the economy by encouraging people to save, invest, and produce more goods and services

Marginal tax rate

A marginal tax rate is the percentage of tax applied to your

last dollar of income(or the next dollar earned), representing the highest tax bracket your income reaches

Business cycle

The normal pattern of expansion and contraction of the economy

Mandatory spending

Expenditures that are required by law, such as the funding for Social Security

Discretionary spending

Expenditures that can be cut from the budget without changing the underlying law, which is everything other than defense, entitlements, and interest on the debt

Regressive

Taxes that take a larger share of poor people’s income than wealthy peoples income, such as sales taxes and payroll taxes

Progressive

Taxes that require upper-income people to pay a higher tax than lower-income people, such as income taxes

Open market operations

The process by which the Federal Reserve System buys and sells securities to influence the money supply

Monetarist theory

The idea that the amount of money in circulation (the money in supply) is the primary influence on economic activity and inflation

Reserve requirement

The minimum amount of money that a bank is required to have on hand to back up its assets

Discount rate

The interest rate that a bank must pay on a short-term loan from the Federal Reserve Bank

Federal Funds Rate (FFR)

The interest rate that a bank must pay on an overnight loan from another bank