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financially secure, happy, and healthy like with upward social mobility attained through and individual's hard work and persistence

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American dream

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overall wealth of citizens and corporations that governments tax to raise revenue

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Tax base

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a system for producing, distributing, and consuming goods and services

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Economy

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no government interference in market place, all privately owned

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Pure Capitalist Economy

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what the US is because national policies are enacted to influence the economy

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Regulates capitalist economy (mixed economy)

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"hands-off" stance with regard to the marketplace Government should neither encourage nor discourage business practices that affected economic health

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Laissez-Faire Economics

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Wealth of Nations, described laissez-faire economics Emphasized that the most effective way to support a strong and stable economy over time is to allow unregulated competition in the marketplace, people's pursuit of their self-interest in an unregulated market place would yield healthy economy (Darwinism) This applied when farming was big, but as this changed laissez-faire disintegrated

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Adam Smith

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the gap in the difference of income between those at the top and at the bottom Monopolies made it difficult for many working class to move up Because of this government began to respond to worker's demands for better wages and working conditions, uniform (national) rules and regulations for business practices needed = need for regulated capitalism When technology became a big part of business cheap labor ballooned

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Income Inequality

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Before great depression government believed in balanced budget for economy A budget where the government's expenditures are equal to or less than its revenues says that during a recession the national government should increase its spending to make jobs and decrease taxes so that people have more money to spend= will stimulate economy

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Keynsian Economics

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spending more than is raised through taxes to pay for military effort During the Great Depression FDR and congress supported deficit spending to make jobs and assistance programs

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deficit spending

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(times of rapid economic growth) Keynesian theory says to cut down government spending and possibly increase taxes Advocates using Fiscal policy combination of tax policy and spending policy for a healthy economy

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economic boom

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Advocates tax cuts and decrease in government regulation to stimulate the economy in times of recession Argues that government collects a lot of money in taxes from workers that they are discouraged from working more than they need to, by cutting taxes people will have more money and work more Bush continued this but then raised taxes to address national debt

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Supply- Side Economics (Reaganomics)

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to reduce or eliminate restrictions on business would help increased production and supply of goods

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Deregulation

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the government's role in making a healthy economy is regulating money supply so rate of inflation remains low

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Monetarism

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Believes that too much money in circulation leads to high inflation rate People spend less cause of higher prices Too little money means less investments and not enough new jobs Target inflation rate of 1-3 percent per year

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Milton Friedman

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Healthy economy has Expanding Gross Domestic Product (GDP), increasing level of worker productivity, low unemployment rate, low inflation rate

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Measuring Economic Health

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total market value of all good and services produced within a country's borders Higher productivity=higher living standards Rising GDP and productivity show expanding economy Healthy economy with low level of inflation

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Gross Domestic Product (GDP)

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which measures the average change in prices over time of regular goods and services Low unemployment rate (5% or less) also shows healthy economy

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Consumer Price Index (CPI)

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measures standard of living in people of various nations , quality of life Long and healthy life Educational opportunities Decent standard of daily living

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Human Development Index (HDI)

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adjusted for inflation so it can be compared across years

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Real income

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total pretax earnings of all residents over age of 15 in a home

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Household income

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income level in the middle of all household incomes Healthy economy would also ensure that all workers earn enough to stay out of poverty (condition lacking sufficient income to buy things they need to live alright)

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Median Household income

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Fiscal year (FY) is the 12 month economic year: October 1 to September 30 of the following year Tax Policy Congress formulates and approves tax law (to raise money) and appropriation laws (how the money will be spent)

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Fiscal Policy and Economic Health

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takes a larger percentage of income from wealthier people than it does from poorer people (National Income Tax is this)

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Progressive tax

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(flat tax) takes the same percentage of each taxpayer's income Regressive Tax: takes greater percentage of income from lower income makers than from higher (State's sales tax)

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Proportional Tax

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good behaviors get tax cuts

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Tax Expenditures (Tax breaks)

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authority from law for agencies to spend government funds Programs that use this are Discretionary Spending Programs Security Programs and nonsecurity programs

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Budget authority

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government spending for debt and programs whose budget authority is provided in legislation that isn't appropriation acts Medicare, Social Security, Medicaid Government must pay as long as they exist

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Mandatory Spending

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Executive budget explains president's fiscal plan, drafter by Office of Management and Budget Must be submitted Fed, 8 months before fiscal year begins

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The President's Executive Budget

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Congressional Budget Office analyzes the executive budget , used by House of Budget committee and Senate to make concurrent budget resolution Establishes a binding expenditure ceiling and floor House and Senate must both agree on concurrent budget resolution

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Congressional Action

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process of rewriting authorization legislation to comply with concurrent budget resolution Continuing resolution, if congress and president haven't come to approve appropriation bills, then congress lets agencies spend by last year's budget

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Budget reconciliation

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money left over when all expenses are paid

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Budget Surplus

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more money spent than collected through revenue

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Budget deficits

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the nation's central banking system who works to maximize employment, ensure stable prices (keep inflation low) and moderate long-term interest rates

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Federal Reserve

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composed of Board of Governors, twelve federal Reserve Banks, and the Federal open Market Committee Setting monetary policy: the body of government policies aimed at maintaining price stability It can raise or lower the reserve requirement (amount of money that financial institutions must keep out of circulation) Can raise or lower the discount rate (interest charged to financial institutions that borrow money from federal reserve bank) Most influential is decision to buy or sell Treasury Securities Supervising and regulating banking institutions Maintaining the stability of financial markets Providing financial services to depository institutions, the national government, and foreign official institutions

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Federal Reserve System (Fed)

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Competition can provide for the public good, but unregulated market competition can be bad for consumers, workers, and the environment Without regulation, companies could put workers in bad conditions, use harmful resources etc. to increase sales

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Regulatory Policy

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Government policies that aim to preserve competition in the market place ICC (Interstate Commerce Commission) was the first agency the federal gov made for regulating business for railroads Securities and Exchange Commission (SEC) created during the great depression

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Business Regulation

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depression era, guaranteed the right of workers to unionize and elect representatives to bargain collectively with management for better wages and conditions

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National Labor Relations Act of 1935 (Wagner Act)

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Government policies directed at protecting workers, consumers, and environment from harmful market place competition Aims to protect the public's health and safety

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Social regulation

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The Jungle motivated Teddy Roosevelt to pass Pure Food and Drug Act and the Meat Inspection Act The Pure Food and Drug Act created FDA to test foods and drugs for human consumption

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Early Social Regulation

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establishes standards for a legal workweek, overtime pay, minimum, wages, record keeping, limits on child labor

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Fair Labor Standards Act in 1938 (FLSA)

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Ralph Nader warned that "a great problem of contemporary life is how to control the power of economic interests which ignore the harmful effects of their applied science and technology" Ignited a consumer safety movement and environmental movement- first Earth Day 1970

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Consumer and Environmental Protection

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protects the public from unreasonable risk of injury associated with more than 15,00 consumer products, can recall these products

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Consumer Product Safety Act (CPSA)

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Since a lot of other nations don't have the same types of policies, it makes trade difficult

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The Cost of Regulation

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national economies are integrated and interdependent

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Global Economy

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each country has one, collection of tax laws and regulations that support the country's international commerce goal of trade policy is to promote prosperous economies

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Trade Policy

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aims at protecting domestic producers and businesses from foreign competition through tariffs and nontariff trade barriers (tax on imported goods)

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Protectionist trade policy

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barriers include government social and business relations as well as government subsidies (tax breaks to support public good doing) most subsidies are given to producers or distributors of goods to promote economic growth

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Nontariff trade barriers

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aims at lowering or eliminating tariffs and nontariff barriers to trade open markets to a greater diversity of products and brisker competition by having no tariffs American companies can participate in the global marketplace for cheaper

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Free Trade Policy

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unemployment is low. consumer levels are relatively stable. productivity of the individual worker is increasing

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Economists view a healthy economy as one in which

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argued for an unregulated economy.

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In his classic Wealth of Nations (1776), economist Adam Smith

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government-regulated capitalism

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What type of economy does the United States have?

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inflation.

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When a gradual increase in the price of oil causes a rise in the prices of food, the economy is in danger of

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consumer price index, or the CPI.

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The most common measure of inflation is the

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do not affect all tax payers equally.

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Taxes levied by the federal government

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generally seen as fair and equitable by most taxpayers.

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Taxes levied in such a manner that the wealthier taxpayers pay more are

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money.

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Monetary policy is directed at influencing the supply of

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the Sherman Antitrust Act and the Clayton Antitrust Act

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Which of the following is an example of how the government attempts to regulate business?

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trade deficit.

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Because the United States currently imports more goods and services than it exports, it has a

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stock market.

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The Securities and Exchange Commission regulates the

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protecting domestic producers and businesses from foreign competition through tariffs and non-tariff trade barriers.

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Protectionist trade policy is aimed at

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intervene actively to abate a recession.

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Following the Great Depression, President Franklin Roosevelt adopted the policies of John Maynard Keynes who recommended that the government

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adopted a policy of free trade.

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Following World War II, Western governments dropped protectionist policies and

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ever increasing.

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Mandatory spending for programs such as Social Security and Medicare/Medicaid is

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that under certain conditions the government should increase spending and reduce taxes to stimulate the economy.

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Keynesian economics recommends

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too much money leads to higher inflation.

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Monetarists believe that

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Federal Reserve Board

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The ________ is responsible for setting U.S. monetary policy.

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lower taxes and decrease business regulation

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During a recession, what advice would a supply-side economist give to the federal government?

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decreases the money supply.

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When the Federal Reserve's Open Market Committee sells bonds it

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regressive tax.

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A sales tax is an example of

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an inability to realize the American dream

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A call for governmental intervention in capitalism rose because of

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120 years ago.

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The first business regulation law, creating the Interstate Commerce Commission, was enacted about

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business regulation.

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The National Labor Relations Act and the Taft-Hartley Act are examples of

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creates mandatory spending. accounts for the majority of government expenditure. need not be re-authorized each year.

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Legislation creating programs which obligate expenditures while the program exists

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only a little

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Annual budget decisions by Congress and the president cover ________ of the spending.

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a continuing resolution.

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If a budget is not completely authorized by the beginning of the new fiscal year, then Congress must pass

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the Office of Management and Budget.

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The annual budget process includes a cost-benefit analysis of proposed regulations by

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the reserve requirement.

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The amount of money financial institutions must keep out of circulation is

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all international trade rules.

answer

The World Trade Organization meets biennially to deliberate on

Poli Sci 102 Chapter 15 – Flashcards

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