Making Economic and Regulatory Policy Chapter 18 Fiscal Policy Government policy that attempts to manage the economy by controlling taxing and spending Monetary Policy Government policy that attempts to manage the economy be controlling the money supply and interest rates. Tariff Tax levied on imports to help protect a nation’s industries , labor, or farmers from foreign competition. It can also be used to raise additional revenue. Excise Tax Consumer tax on a specific kind of merchandise, such as tobacco. Progressive Tax A tax graduated so that people with higher income pay a larger fraction of their income than people with lower income. Regressive Tax A tax whereby people with lower income pay a higher fraction of their income than people with higher incomes. Deficit The difference between the revenues raised annually from sources of income other than borrowing and the expenditures of government, including paying the interest on past borrowing. Debt The accumulation total of federal deficits, minus surpluses, over the years. Gross Domestic Product (GDP) An estimate of the total output of all economic activity in the nation, including goods and services. Entitlement Program Government programs such as Social Security , Medicare, and unemployment insurance to which qualified citizens are”entitled” by national legislation. Office of Management Budget Presidential staff agency that serves as a clearinghouse for budgetary requests and management improvements. Congressional Budget Office An agency of Congress that analyzes presidential budget recommendations and estimates the costs of proposed legislation. Concurrent Resolution A resolution passed in the same form by both houses of Congress that expresses the “sense” of Congress on some question. It is not sent to the president and does not have the force of law. Reconciliation Process by which Congress sets ceilings on what Appropriations Subcommittees can appropriate. General Accounting Office An independent investigative arm of Congress established in 1921 to check on receipt and disbursement of public funds and review the performance of government agencies. Comptroller General Head of the General Accounting Office, appointed by the president with the approval of the Senate for a 15-year term. Sales Tax General tax on sales transaction, sometimes exempting food and drugs. Value Added Tax (VAT) A tax on increased value of a product at each stage of production and distribution rather than just at the point of the sale. Tax Expenditure Loss of tax revenue due to federal tax laws that provide special tax incentives or benefits to individuals or businesses. Item Veto A measure passed by Congress in 1996 and ruled unconstitutional by the Supreme Court in 1998 whereby the president was given the authority to strike specific spending programs from the budget passed by Congress. Federal Reserve System The System created by Congress in 1913 to establish banking practices and regulate currency in circulation and the amount of credit available. It is comprised of 12 regional banks, and its major responsibilities are supervised by the Federal Reserve Board of Governors. Laissez-faire Economics Economic theory that opposes governmental interference in the economy beyond what is necessary to protect life and property. Keynesian Economics Economic theory based on the principles of John Maynard Keynes stating tat government spending should increase during business slumps and be curbed during booms. Inflation A rise in the general price level (and decrease in dollar value) owing to an increase in the volume of money and credit in relation to available goods. Trade Deficit An imbalance in international trade in which the value of imports exceeds the value of exports. Quota In trade context, a limit on the quantity of of a particular product that may be imported. General Agreement on Tariffs and Trade (GATT) An international trade organization with 125 members, including the United States , that seeks to encourage free trade by lowering tariffs and other trade restrictions. North American Free Trade Agreement Agreement signed by the United States, Canada, and Mexico in 1992 to form the largest free-trade zone in the world. Protectionism Policy of erecting trade barriers to protect domestic industry. Regulation The attempt by government to control the behavior of corporations, other governments, or citizens through altering the natural workings of the open market to achieve some desired goal. Independent Regulatory Agency A government agency that exists outside the three branches of government and is responsible for enforcing particular statues. Monopoly Domination of an industry by a single company; also the company that dominates. Antitrust Regulation Federal laws and regulations that try to prevent businesses from dominating particular market through monopoly or restraint of trade. Trust A monopoly that controls goods and services, often in combinations that reduce competition. Interlocking Directorate A corporation in which an officer of director sits on the board of a competitor, with the effect of restraining trade. Yellow-dog Contract Contract by an anti-union employer that forces new workers to promise they will not join a union as a condition of employment. Closed Shop A company with a labor agreement whereby union membership is a condition of employment. Union Shop A company in which new employees must join a union within a stated time period. Labor Injunction A court order forbidding specific individuals or groups from performing certain acts (such as striking) that the court considers harmful to the rights and property of an employer or community. Collective Bargaining Method whereby representatives of the union and employer determine wages, hours, and other conditions of employment through direct negotiation. Environmental Impact Statement A statement required by federal law from all agencies for any project using federal funds to assess the potential effect of the new construction or development on the environment. Deregulation A Policy promoting cutbacks in the amount of federal regulation in specific areas of economic activity.
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