chapter 12 flashcards-unit f
what is Keynesian economic theory and what is the government’s role in it? Also, why does it work?
The government should actively manage the economy
-The government should decrease spending during good times to limit inflation (because if people have more money, businesses will charge increasingly larger prices, which will eventually exceed the increased cash flow, and then there will be another recession)
- they do this by increasing spending (through providing tax returns and added benefits) and lowering taxes during downturns to boost demand and stimulate growth. This is because when people receive extra money, they are more likley to spend it, which supports businesses and increases economic growth. Lowering taxes increases cash flow to businesses and indivudlas.)
what is supply side economic theory and what is its reasoning?
-supply-side economic theory is the theory that economic growth can most effectively be fostered by lowering taxes, decreasing regulation, overall decreasing the costs of businessess
-this is because when taxes are lower, people spend more, which boost production, and creates jobs, especially when there is deregulation because businesses can function more easily and independently
what is the office of management and budget and what is its role in the government?
The Office of Management and Budget (OMB) is a part of the Executive Office of the President of the United States. Its main role is to assist the President in overseeing the preparation of the federal budget and to supervise its administration in Executive Branch agencies.
What is Medicare?
a federal program that provides health insurance to seniors and the disabled
what is Medicaid?
a federal program that provides healthcare for the poor
what is monetary policy and who is responsible for it in the federal government?
A set of economic policy tools designed to regulate the amount of money in the economy
-the federal reserve system is responsible for creating monetary policy (IT CAN CREATE POLICY BECAUSE IT WAS CREATED BY CONGRESS!)
what is the federal reserve system and what is its role in the federal government?
the central bank of the United States. Its main roles are to manage the nation’s monetary policy, regulate and supervise banks, maintain financial stability, and provide banking services to the government and financial institutions.
who are the members of the federal reserve system and what branch of government is it part of?
Board of Governors: This is a seven-member board based in Washington, D.C. The members are appointed by the President and confirmed by the Senate.
Federal Reserve Banks: There are 12 regional Federal Reserve Banks located in major cities across the country.
- it is an indepndent agency, which is part of the federal bureacruacy but NOT head by a cabinet member. ! THE FEDERAL BUREAUCRACY IS TECHNICALLY APRT OF THE EXECUTIVE BRANCH!
what is fiscal policy and what branch of government is responsible for making it?
overnment use of taxes and spending to attempt to lower unemployment, support economic growth, and stabilize the economy.
-government
what is the consumer price index (cpi)
the cost of a fixed basket of goods and services over time, used to measure the cost of living.
what is political ideology?
a set of beliefs about the desired goals and outcomes of a process of governance.
what is a privilege?
something a person may obtain or receive, but that the government can take away.
what is libertarianism?
An ideology favoring very little government regulation and intervention beyond protecting private property and individual liberty.
what is laissez-faire economic policy?
Economic policy in which governments intrude as little as possible in the economic transactions between citizens and businesses.
what is command-and-control economic policy?
Economic policy in which government dictates much of a nation’s economic activity, including the amount of production and price for goods.
what is mixed economic policy?
Economic policy in which many economic decisions are left to individuals and businesses, with the government regulating economic activity.
what is gross domestic product?
The total value of goods and services produced by an economy.
What is an economic recession?
A period of decline in economic activity, typically defined by two consecutive quarters of negative GDP growth
what is the unemployment rate?
The percentage of people actively looking for work who cannot find jobs.
what is inflation?
the rise in pirces of goods and serv
What are the pros and cons of Keynesian economics?
pros: reduces economic inequality, because everyone benefits from lowered taxes and increased cash flow
cons-increased spending=greater national debt
what are the pros and cons of supply-side economics?
pros: economic freedom
cons: deficit (because the government isn’t taxing enough) and inequality ( the government isn’t providing as many benefits to lower-income individuals, and the rich just keep gaining more wealth)
Who tends to favor Keynesian economics? Who tends to favor supply-side economics?
liberals tend to favor Keynesian economics, while republicans tend to favor supply-side economics
What provisions are in place to ensure that the Federal Reserve is independent from political pressuer?
-memebrs serve non-renewable 14 year terms, so they don’t have to worry about elections, constitutents, or pleasing their appointee
-chairman’s 4 year term ends after the president, which ensures nonpartisanship because both parties are represented for at least one year in the next president’s term
