Eco – Chaps 12 – 18
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Cabinet
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Government employees who assist and advise the President
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Embargo
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A government order that forbids importing or exporting goods with a specified nation
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Per capita
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Amount of each person
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Privatization
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The act of returning property or functions previously owned or performed by government to the private sector
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Transfer Payment
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A payment made by a government to someone who does not produce a good or service in return
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Interest Group
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A group whose members hold common political beliefs and work to influence government officials, policies, and practices
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Lobbyist
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An individual who is paid to influence legislators and government administrators to act in ways that are favorable to the lobbyist's employer
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Medium of Exchange
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Anything that a seller will accept as payment for a good or service
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Standard of Value
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A measure of relative value of various goods or services
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Store of Value
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A characteristic of a medium of exchange that allows it, and thus value or wealth, to be stored
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Commodity Money
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A money system that is based on an item (a commodity) that has value to a society
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Representative Money
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A money system in which an item has value because it can be exchanged for something else that is valuable
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Specie
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Money in the form of coins.
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Fiat Money
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Money that is not backed by gold, silver, or other items of value but that has worth because a government requires that it be accepted as a medium of exchange
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Currency
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The paper money and coins that are in circulation in a nation and that make up its money supply
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Near money
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An asset that can easily be converted into cash when needed
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Gold Standard
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A system in which the value of a nation's money is defined by how many units of its currency are redeemable for a specified amountof gold
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Commercial Bank
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A financial institution whose chief purpose is to accept savings and checking deposits, make loans to businesses and individuals, and transfer money among businesses, other banks, financial institutions, and individuals
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Savings and Loan Associations
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A financial institution that lends money in which depositors maintain savings and checking accounts
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Mutual Savings bank
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A bank that is owned by its depositors, who share in its profits
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Deregulation
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A lifting or lessening of government control or restrictions on a company, industry, or profession
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Default
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The failure to make payments on a loan
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Pyramid reserves
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A system in which smaller banks deposit some of their reserves into larger banks and the larger banks deposit some of their reserves into the largest banks
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Check clearing
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The daily process of debiting and crediting banks' reserve accounts and checking accounts
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Money supply
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The total amount circulating at any given time in a nation's economy
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Monetary Policy
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A government's plan for regulating a nation's money supply and the availability of credit in order to accomplish certain economic goals
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Easy-money policy
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Government methods, such as reduced interest rates, to expand the economy's money supply
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Tight-money policy
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Government methods, such as increased interest rates, designed to reduce the economy's money supply
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Discount rate
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The interest charged by the Federal Reserve for loans to member banks
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Prime rate
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The interest rate for loans that banks charge to their most reliable customers
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Reserve requirement
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Money the Fed requires a bank to hold either in its own vaults or in a district Federal Reserve bank
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Margin requirement
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The percentage of the price an investor must pay in cash to purchase a stock, convertible bond, or other security
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Moral suasion
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Unofficial pressure that the Federal Reserve uses to persuade member banks to behave in a certain way
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Fiscal Policy
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The overall government program that establishes levels of taxing, borrowing, and spending that promote the desired economic goals for the naiton
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Tax Rate
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The percentage at which income, property, or purchase are taxed
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Excise tax
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A tax placed by the federal government and some state governments on the manufacture, sale, or consumption of certain goods, often those considered to be luxury items or socially indesirable products
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Estate tax
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A tax levied on the assets, or property, of a person who has died
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Gift tax
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A tax by the federal government and some state governments on large transfers of property that are made without something of value being given in return
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Customs duty
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A tax on goods brought into the United States
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Supply-side economics
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The economic theory that focuses on achieving economic stability and growth by increasing the supply of goods and servies throughout the economy
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Demand-side economics
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An economic theory developed by John Maynard Keynes proposing that government should stimulate the economy through measures that influence the overall demand for goods and services
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Tax incentive
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A provision in a tax law intended to stimulate economic activity by encouraging businesses to invest in new capital
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Investment tax credit
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A tax incentive that allows businesses to deduct from their taxes part of their investment in new equipment
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Restrictive fiscal policy
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A government policy designed to reduce economic activity in times of overexpansion by increasing taxes and/or reducing government spending
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Expansionary fiscal policy
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A government policy designed to stimulate economic activity by reducing taxes and increasing spending
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Federal budget
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The estimate of the revenues and expenses of the federal government for a fiscal year
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Fiscal year
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Any 12-month period for financial reporting that ends on a date other than December 31.
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Budget deficit
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The amount that an organization's spending exceeds the revenue it takes in over a designated period
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Budget surplus
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The amount that an organization's income exceeds its spending over a designated period
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Deficit spending
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A government policy of spending more moeny on its programs than it is able to cover with expected revenue
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National debt
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The total amount of money that a nation owes its creditors
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Debt ceiling
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The maximum limit of debt that a local, state, or national government allows for itself by law
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Market system
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An economic system in which the three basic economic questions are answered by individuals and businesses
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Command system
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An economic system in which basic economic questions are made by the government
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Market socialism
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A type of socialism in which the means of production are owned or controlled by the government, but individuals and businesses make some economic decisions
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Mercantilism
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An economic theory that defined a nation's power in terms of specie; used to direct most European economies between 1500 and 1800
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Indicative planning
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The development of nonmandatory economic goals by a government in order to coordinate private and public sector investment and production plans
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Nationalization
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The government takeover of specific companies or of a major segment of a nation's private industry, such as manufacturing, agriculture, or transportation
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Bourgeoisie
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The middle class, particularly as distinct from the upper class and the poor; the people who own the means of production in a capitalist nation
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Proletariat
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The working class, whose members the radical political theorist Karl Marx believed were oppressed by the bourgeoisie and would eventually overthrow the bourgeoisie in a violent revolution
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Collectivization
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The Soviet Union's policy of taking privately owned land to form large state-run farms
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Great Leap Forward
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An unsuccessful economic development plan for the People's Republic of China that was introduced by communist leaders in 1958
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People's Communes
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Large collective farms established in China beginning in 1958
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Cultural Revolution
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A violent movement in China from 1966 to 1976 that sought to preserve the communist system
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Four Modernizations
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A program for economic development in China that was announced in 1964; focused on improving agriculture, industry, science and technology, and defense
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Household Responsibility System
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A government program in rural China enabling farmers to lease state-owned land in exchange for a portion of their crop
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Tiananmen Square Massacre
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A 1989 incident in which Chinese demonstrators seeking greater political freedoms were brutally attacked by China's armed forces
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Economic development
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The degree to which a nation has developed its industrial, service, technical, and agricultural sector
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Developed nations
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A nation with a high level of industrial development and technical expertise, as well as various established economic institutions such as banks and stock markets
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Developing nations
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A nation with little industry and that has a low standard of living in comparison with developed nations
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Arable
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Fit for or used for growing crops
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Subsistence agriculture
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A type of farming in which there are only enough crops and livestock raised to meet a family's basic needs, with no excess left over to sell or trade
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One-crop economy
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An economy that is dominated by the production of a single item
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Capital formation
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The accumulation of financial and capital goods that promote increased production and economic development
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Expropriation
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The seizure of private property by a government, either with no payment or only partial payment to its owners
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Land reform
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Redistribution, or changes in land ownership, carried out or enforced by the government
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Multinational corporation
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A business that is based in one nation but operates divisions or subsidiaries in other nations
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Absolute advantage
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The ability of a nation, region, or company to produce a certain good or service more efficiently and cheaply than any other nation, region, or company
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Comparative advantage
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The ability of a nation, region, or company to produce a certain good or service more cheaply than any other country
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Foreign exchange rate
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The rate at which one nation's currency can be exchanged for another's
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Foreign exchange market
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A market in which the currencies of different nations are bought and sold
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Adjustable-peg system
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A system in which the exchange rates between currencies are fixed at specific values instead of reflecting changing enconomic conditions
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Devaluation
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A reduction in the value of a nation's currency
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Appreciation
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An increase in the buying power of money; an increase in the value of a possession, such as a share of stock, a work of art, or real estate; an increase in the value of a nation's money relative to that of another nation
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Floating exchange rate
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A foreign exchange rate that continuously varies according to supply and demand
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Balance of payments
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The accounting record of what a nation owes to and is owed by foreign countries and international institutions
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Balance of trade
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The difference between the value of a nation's exports and that of its imports
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Trade surplus
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A condition in international trade in which the value of a nation's exports to another country exceeds the value of its imports from that particular country
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Trade deficit
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A condition in international trade in which the value of a nation's imports from another country exceeds the value of its exports to that particular country
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Trade barrier
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Any limitation on the flow of goods between nations
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Revenue tariff
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A tax or customs duty that a nation's government places on imports in order to raise money
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Protective tariff
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A tax or customs duty that a nation's government places on certain imports to restrict their sale
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Import quota
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A law limiting the amount of a foreign-produced good that may be imported into a nation during a specified period of time
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Voluntary trade restriction
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An agreement-not requiring congressional legislation-between two or more nations to limit or control trade by restricting shipments of certain products to a particular country
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Free trade
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Trade among nations that is not restrained by protective tariffs or other government restrictions
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Protectionism
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The use of trade barriers to protect a nation's industries against foreign competition
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Perestroika
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An economic policy adopted in the former Soviet Union; intended to incease automation and labor efficiency but it led eventually to the end of central planning in Russian economy; economic and political reform
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Economic stabilization
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Federal government to promote the general welfare of the people; moderating the business cycle and by responding to market failures
