Politics Chapter 14

Fiscal Policy

The government’s use of taxing, monetary, and spending powers to manipulate the economy.

Inflation

A consistent increase in the general level of prices.

Tariff

A tax on imported goods.

Redistribution

A policy whose objective is to tax or spend in such a way as to reduce the disparities of wealth between the lowest and the highest income brackets.

Progressive Taxation

Taxation that hits upper‐income brackets more heavily.

Regressive Taxation

Taxation that hits lower‐income brackets more heavily.

Budget Deficit

The amount by which government spending exceeds government revenue in a fiscal year.

National Debt

The total amount of money the government has borrowed.

Subsidies

Government grants of cash or other valuable commodities, such as land, to an individual or an organization; used to promote activities desired by the government, reward political support, or buy off political opposition.

Contracting

The power of government to set conditions on companies seeking to sell goods or services to government agencies.

Monetary Policies

Efforts to regulate the economy through the manipulation of the supply of money and credit; America’s most powerful institution in this area of monetary policy is the Federal Reserve Board.

Federal Reserve System

A system of 12 Federal Reserve banks that facilitates exchanges of cash, checks, and credit; regulates member banks; and uses monetary policies to fight inflation and deflation.

Monopoly

A single firm in a market that controls all the goods and services of that market; absence of competition.

Antitrust Policy

Government regulation of large businesses that have established monopolies.

Deregulation

A policy of reducing or eliminating regulatory restraints on the conduct of individuals or private institutions.

Laissez‐Faire Capitalism

An economic system in which the means of production and distribution are privately owned and operated for profit with minimal or no government interference.

Keynesians

Followers of the economic theories of John Maynard Keynes, who argued that the government can stimulate the economy by increasing public spending or by cutting taxes.

Supply‐Side Economics

An economic theory that posits that reducing the marginal rate of taxation will create a productive economy by promoting levels of work and investment that would otherwise be discouraged by higher taxes.

Welfare State

The collection of policies a nation has to promote and protect the economic and social well‐being of its citizens.

Social Security

A contributory welfare program into which working Americans contribute a percentage of their wages and from which they receive cash benefits after retirement or if they become disabled.

Contributory Programs

Social programs financed in whole or in part by taxation or other mandatory contributions by their present or future recipients.

Indexing

A periodic process of adjusting social benefits or wages to account for increases in the cost of living.

Cost‐of‐Living Adjustments (COLAs)

Changes made to the level of benefits of a government program based on the rate of inflation.

Medicare

A form of national health insurance for the elderly and the disabled.

Noncontributory Programs

Social programs that provide assistance to people on the basis of demonstrated need rather than any contribution they have made.

Means Testing

A procedure by which potential beneficiaries of a social assistance program establish their eligibility by demonstrating a genuine need for the assistance.

Medicaid

A federally and state‐financed, state‐operated program providing medical services to low‐income people.

Supplemental Nutrition Assistance Program (SNAP)

The largest antipoverty program, which provides recipients with a debit card for food at most grocery stores; formerly known as food stamps.

In-Kind Benefits

Noncash goods and services provided to needy individuals and families by the federal government.

Equality of Opportunity

A widely shared American ideal that all people should have the freedom to use whatever talents and wealth they have to reach their fullest potential.