AP Government: Key Concepts in Federal Budgeting and Economic Policy

Agenda

The list of issues and priorities that government officials and the public pay attention to

Bonds

Government-issued debt securities used to borrow money from investors, must be repaid with interest

Discount Rate

The interest rate the Federal Reserve charges banks for short-term loans

Entitlements

Government programs that provide benefits to all citizens who meet specific eligibility requirements (like Social Security or Medicare)

Federal Reserve Board

The central banking system of the U.S. that controls monetary policy and regulates the money supply

Fiscal Policy

Government's use of taxing and spending to influence the economy

Flat Tax

A tax system where everyone pays the same percentage rate regardless of income level

Globalization

The increasing interconnection of world economies, cultures, and populations through trade and technology

Inflation

The general increase in prices and decrease in the purchasing power of money over time

Internal Revenue Service (IRS)

Federal agency created to collect taxes and enforce tax laws; administers the federal tax code

Mandatory Spending

Government spending required by existing laws (like Social Security, Medicare, Medicaid); not subject to annual budget approval

Means Test

Evaluation of a person's income/resources to determine eligibility for government assistance programs

Medicaid

Federal-state program providing health insurance for low-income individuals and families

Medicare

Federal health insurance program for people 65 and older and certain disabled individuals

Monetary Policy

Federal Reserve's actions to control money supply and interest rates to influence the economy

North American Free Trade Agreement (NAFTA)

Trade agreement (1994-2020) eliminating tariffs between U.S., Canada, and Mexico to increase trade; replaced by USMCA

Patient Protection and Affordable Care Act (ACA/Obamacare)

2010 law expanding health insurance coverage, requiring most Americans to have insurance, and prohibiting denial based on pre-existing conditions

Progressive Income Tax

Tax system where tax rates increase as income increases; higher earners pay a higher percentage

Reserve Requirement

The minimum amount of money banks must hold in reserve rather than loan out; set by the Federal Reserve

Sixteenth Amendment

Constitutional amendment (1913) giving Congress the power to collect federal income tax

Social Security Act

1935 law creating retirement benefits, unemployment insurance, and aid for dependent children and disabled

Social Welfare

Government programs designed to promote public well-being through assistance to those in need

Supply-Side Economics

Economic theory that reducing taxes (especially on businesses and wealthy) stimulates investment and economic growth

Trade Balance

The difference between a country's exports and imports; positive = surplus, negative = deficit