Gov Unit 3

16th amendment

allows income tax

progressive tax

tax made to take more from the wealthy than poor

regressive tax

tax made to take more from the poor than the wealthy

proportional tax

tax made to take same from poor and wealthy

pay as you earn taxation

income taxes are collected over the course of the year

tax withholding

employers take tax payments out of ones pay before they recieve it

tax returns

adjusts how much tax they paid, if they paid too much they get a refund, if they paid too little they must pay the balance

social security taxes

provides funds for older americans and disability insurance

unemployment taxes

provides compensation for workers without a job at no fault of their own

excise tax

tax on sale/production of good

estate tax

tax on total value of money and property of a person who died

gift tax

tax on money or property given as a gift worth over $14,000

import taxes

taxes on good entering the U.S.

entitlement programs

social welfare programs that people are entitle to if they meet certain requirements

discretionary spending

spending category where government can choose how to fun

balanced budget

when the government spending and taxes are equal

budget surplus

when the government taxes more than it spends

budget deficit

when the government spends more than it taxes

sales tax

taxes on goods sold within the state, not food

excise tax

sin tax, tax on alcohol, cigarettes, etc

corporate income tax

tax on corporations in the state

property tax

tax levied on value of property owned

laissez-faire

policy where government intrudes as little as possible

mixed economy

most economic actions are left to individuals/businesses with some government regulation

capitalism

individual ownership of property, resources, and businesses

command economy

government dictates most of the economy

socialism

government controls some factors of production and business

communism

government controls all factors of production and business

gross domestic product

total market value of all goods/services produced in a year

unemployment rate

percentage of people without jobs looking for work

consumer price index

cost of a fixed basket of goods and services, measures inflation

federal reserve system

set of economic policy tools designed to regulate the amount of money in the economy

discount rate

determines whether or not banks will give loans

reserve requirement

amount of money banks must hold

open-market operations

increasing or decreasing amount of money in circulation through buying or selling bonds

intermediate products

goods used to make other products already counted in GDP

second-hand sales

sales of used goods not included in GDP

non-market transactions

economic activites that do not change the market

underground economy

unreported/illegal activities not in GDP

current GDP

measures in current prices, unadjusted for inflation

real GDP

GDP after adustments for inflation

GDP per capita

GDP divided by population

GNP

the measure of national income

net national product

GNP minus depreciation

national income

total income after all taxes except corporate

personal income

total amount of income before income tax

consumer sector

consists of all persons who occupy a household

investment sector

proprietorships, partnerships, and corporations that produce output

government sector

includes all levels of government

foreign sector

all consumers and producers outside of the U.S.

business cycles

show regular increases and decreases within the economy

business fluctuations

rise and fall of real GDP in an irregular manner

recession

decline in real GDP lasting 2 quarters

peak

when GDP stops expanding and starts decreasing

trough

lowest point before GDP begins to rise

monetary policy decisions

the federal reserves systems policy on interest rates

external shocks

increases in oil prices, wars, and international conflict

leading economic indicators

variables that predict recession or recovery in the economy

coincident indicators

GDP, employment levels, sales

structural unemployment

unemployment when skills do not match the jobs that are available

seasonal unemployment

unemployment linked to seasonal work

frictional unemployment

unemployment due to leaving and finding another job

cyclical unemployment

unemployment caused by a business cycle recession

purchasing power

amount of goods and services that can be bought by a given amount of money

asset bubble

phenomenon characterized by surges in asset prices to levels significantly above the fundamental value of that asset

constant dollars

price from past has been adjusted to inflation

current dollars

refers to price from past not adjusted for inflation

deflation

reduction of general prices in an economy

cost-push inflation

rising prices as a result of rising production costs

financial asset

claim on the property or income of a borrower

financial system

network of savers, investors, and financial institutions working together to transfer savings for investment uses

financial intermediary

institution that lends funds that savers provide

financial company

a firm that specializes in making loans directly to consumers

pension funds

is a fund set up to collect income and disburse payments to those person eligible for retirement, old age, or disability benefits

equity

share of common stock that represents ownership of corporations

stockbroker

person who buys or sells equities for clients

price earning ratio

stocks closing price divided by annual earnings per share

efficient market hypothesis

argument that stocks are usually priced correctly and bargains are hard to find

portfolio diversification

strategy of holding different investments to protect against risk

401k plan

tax deferred investment and savings plan that acts as a personal pension fund for employees

bull market

a period of increased stock trading and rising stock prices

bear market

a period of decreased stock trading and lowered stock prices

bond

contract to repay borrowed money with fixed interest

corporate bonds

bonds issued by corporations

municipal bonds

bonds issued by state and local government

government savings bonds

non transferable bonds issued by the federal government

treasury notes

long term government obligation with a maturity of 2 to 10 years

treasury bills

short term government obligation with a maturity of a few weeks

fiscal policy

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

expansionary fiscal policy

increases aggregate demand

contractionary fiscal policy

reduces aggregate demand

keynesian economics

a form of demand-side economics that encourages government action to increase or decrease demand and output

hayek economics

the goverment should not be involved with funding

district banks

12 federal reserve equally powerful banks

federal open market committee

makes decisions about levels of interest rates

monetary policy

actions by the Federal Reserve System to expand or contract the money supply in order to affect the cost and availability of credit

interest rate

the price of credit to a borrower

easy money policy

monetary policy that results in lower interest rates and a greater access to credit

tight money policy

monetary policy that results in higher interest rates and restricted access to credit

reserve requirement

raising or lowering how much must be deposited in the national bank from each bank