Unit 2: Government's role in economy

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19 Terms

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Public Goods
A shared good or service that would be inefficient or impractical to make consumers pay for.
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Market Failure
Occurs when the market cannot distribute resources efficiently, prompting government intervention.
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Public Sector
Part of the economy funded by the government, including teachers, politicians, and police/fire departments.
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Private Sector
Part of the economy funded by individual businesses.
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Federal Reserve Bank
The US central bank that sets monetary policy.
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Reserve Requirement
The amount of actual cash a bank is required to hold in its vaults at any time.
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Discount Rate
The interest rate charged by the Fed for banks to borrow money on a short-term basis.
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Open Market Operations
The Fed's practice of buying and selling government debt (US Treasuries) to influence the economy.
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SEC
Securities and Exchange Commission; a federal agency that regulates the purchase and sale of securities.
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FDIC
Federal Deposit Insurance Corporation that insures deposits up to $250,000.
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Social Security
A program that collects payroll taxes from current workers to redistribute to retirees or those unable to work.
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Temporary Assistance for Needy Families (TANF)
Federal program that provides funds to states to design welfare programs for needy families.
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Free Lunch
Refers to the idea that a truly free lunch does not exist in economics.
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Subsidy
A direct or indirect payment made by the government to lower the price of a good or service for individuals or institutions.
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Living Wage
The minimum income necessary for a worker to meet basic needs without government assistance.
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Minimum Wage
A price floor that prohibits employers from paying less than a specified rate, such as $15.00/hour in NY.
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Corporate Tax Rate
The percentage of corporate income that is paid as tax to the government.
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Purchasing Power
The value of a currency in terms of the number of goods or services that can be bought with it.
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Economic Inequality
The unequal distribution of wealth and income in society.