Unit 2: Government's role in economy

Public Goods

A shared good or service that would be inefficient or impractical to make consumers pay for.

Market Failure

Occurs when the market cannot distribute resources efficiently, prompting government intervention.

Public Sector

Part of the economy funded by the government, including teachers, politicians, and police/fire departments.

Private Sector

Part of the economy funded by individual businesses.

Federal Reserve Bank

The US central bank that sets monetary policy.

Reserve Requirement

The amount of actual cash a bank is required to hold in its vaults at any time.

Discount Rate

The interest rate charged by the Fed for banks to borrow money on a short-term basis.

Open Market Operations

The Fed's practice of buying and selling government debt (US Treasuries) to influence the economy.

SEC

Securities and Exchange Commission; a federal agency that regulates the purchase and sale of securities.

FDIC

Federal Deposit Insurance Corporation that insures deposits up to $250,000.

Social Security

A program that collects payroll taxes from current workers to redistribute to retirees or those unable to work.

Temporary Assistance for Needy Families (TANF)

Federal program that provides funds to states to design welfare programs for needy families.

Free Lunch

Refers to the idea that a truly free lunch does not exist in economics.

Subsidy

A direct or indirect payment made by the government to lower the price of a good or service for individuals or institutions.

Living Wage

The minimum income necessary for a worker to meet basic needs without government assistance.

Minimum Wage

A price floor that prohibits employers from paying less than a specified rate, such as $15.00/hour in NY.

Corporate Tax Rate

The percentage of corporate income that is paid as tax to the government.

Purchasing Power

The value of a currency in terms of the number of goods or services that can be bought with it.

Economic Inequality

The unequal distribution of wealth and income in society.