AP Gov Economic Policy

fiscal policy

Government policy that attempts to manage the economy by controlling taxing and spending.

monetary policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

business cycle

fluctuations in economic activity, such as employment and production

inflation

a general increase in the cost of goods and services

unemployment

The number of Americans who are out of work but actively looking for a job. The number does not usually include those who are not looking.

stagflation

combination of stagnant economic growth and inflation

CPI

Consumer Price Index (changes in average price of consumption - or cost of living)

unemployment rate

the percentage of the work force that is unemployed at any given date

GDP

Gross Domestic Product- the total market value of all final goods and services produced annually in an economy

excise tax

Consumer tax on a specific kind of merchandise, such as tobacco.

individual income tax

a tax based on a person's earnings

payroll taxes

tax on payroll- include Social Security and Medicare taxes.

corporate income taxes

federal taxes paid on corporate profits; also imposed by state, local and foreign governments

budget deficit

the condition in which a nation spends more than it takes in from taxes

tariffs

taxes on imported goods

progressive tax

a tax for which the percentage of income paid in taxes increases as income increases

regressive tax

A tax whereby people with lower incomes pay a higher fraction of their income than people with higher incomes.

national debt

the debt of the national government (as distinguished from the debts of individuals and businesses and political subdivisions)

mandatory programs

Government programs, such as Social Security expenditures, in which spending automatically increases from one year to the next without specific annual appropriations action by Congress

discretionary programs

Discretionary spending requires an annual appropriation bill, which is a piece of legislation. Discretionary spending is typically set by the House and Senate Appropriations Committees and their various subcommittees. Since the spending is typically for a fixed period (usually a year), it is said to be under the discretion of the Congress

OMB

Office of Management and Budget; prepares the federal budget and monitors spending

CBO

Congressional Budget Office - congress' check on the budget

tax expenditures

revenue losses that result from special exemptions, exclusions, or deductions on federal tax law

sales tax

a tax based on the cost of the item purchased and collected directly from the buyer

VAT

value-added tax

federal reserve system

1913- establish banking practices and regulate commerce

ben burnanke

federal funds rate

the amount of interest banks charge for loans to eachother

laissez faire economics

opposes government regulation

conservative

keynesian economics

john maynard keynes

government spending increase during times of difficulty

liberal

protectionism

erection of trade barriers to protect domestic industry

trade deficit

imbalance of international trade where value of imports exceeds value of exports

dumping

selling products below their value

world trade organization (WTO)

promotes free trade around the world

GATT General Agreement on Tariffs and Trade

GATT

international trade organization with more than 130 members encourages to lower tariffs to promote trade

NAFTA

north america free trade agreement

US Canada Mexico

1992

largest free trade zone