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Flashcards in Domestic and Economic Policy Deck (62)
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domestic policy

Domestic policy refers to all the laws, programs, and administrative decisions within a given nation, such as health care or economic policy.


What are the four major domestic policy types?

There are four major domestic policy types:

  1. Economic
  2. Social Welfare
  3. Health Care
  4. Environmental


What are the three major policy types?

The three major policy types are:

  • Distributive Policies: subsidies aimed at certain groups
  • Regulatory Policies: agencies and departments craft rules to establish federal policy under their rule-making authority
  • Redistributive Policies: the federal government takes from one group and gives to another


Why are distributive policies popular with politicians?

Distributive policies usually come in the form of a subsidy to certain groups or companies, such as farmers or aircraft plants. Often, politicians are rewarded for the subsidy in the form of votes and political contributions.


Which branch of the federal government is responsible for most regulatory policies?

Although Congress drafts most laws, regulatory policies stem from agencies and departments within the executive branch. The agencies and departments enact regulations pursuant to their rule-making authority.

As an example, the National Highway Traffic Safety Administration monitors Corporate Average Fuel Economy (CAFE) standards, enforcing regulations that are aimed at increasing fuel economy as part of the U.S. domestic policy aimed at reducing oil consumption.


What are some examples of redistributive polices?

Redistributive policies provide funds raised from tax revenue to those who need financial assistance. Examples include housing assistance (Section 8), the Temporary Assistance to Needy Familes (TANF) program, and the Supplemental Nutrition Assistance Program (aka Food Stamps).


What is the key factor in determining choices in economic policy?

Economic policy is determined by economic theory. For example, Keynesian economic theorists focus on different economic policies than supply-side economic theorists. The three main economic theories in U.S. policy are: (1) Keynesian economic theory, (2) monetarism, (3) supply-side economics. 


Generally, what are the two overarching concerns that govern economic policy?

The two overarching concerns are unemployment and inflation. Based upon their support among lower-income Americans and union workers, Democrats typically express more concern about employment, while Republicans focus on inflation.


What is Keynesian economic theory?

In simple terms, Keynesian economic theorists focus on stimulating demand for products by having the government intervene with influxes of cash during a recession to stimulate purchases of goods and savings.


What is monetarism and how does it relate to domestic policy?

Monetarism contends that excessive expansion of the money supply is inflationary (such as urged by the Keynesists), leading to higher prices. Monetarists argue that government should focus on maintaining stable prices. 

Monetarism was proposed by Milton Friedman and was successfully used during the late 1970s and early 1980s.


Restricting or expanding the monetary supply is a key component of monetarist domestic economic policy. How do monetarists typically do so?

Monetarists typically will use the Federal Reserve to raise or lower interest rates. At higher interest rates, companies and individuals borrow less, slowing the rate of inflation and restraining the marketplace. At lower interest rates, the opposite takes place.


How do supply-side economic theorists view domestic economic policy?

Supply-side economic theorists contend that by making it easier to supply goods (for example, decreasing regulation and taxes), demand will be spurred and the economy will improve.



Reaganomics was the economic policy of President Reagan, who espoused supply- side economic theory with a dash of monetism. Reagan sought to reduce government spending, lowered marginal tax rates, reduced regulation, and reduced inflation by controlling the growth of the money supply.

Reagan's program started an economic boom, but he failed to reduce government spending, leading to increased deficits.


What is the role of the Council of Economic Advisers?

The Council of Economic Advisers guides the president in formulating and enacting domestic economic policies by the preparation of objective research. The council also prepares the president's annual economic report.

The council is comprised of a number of economic experts who specialize in fields such as tax, macroeconomics, and manufacturing policy.


What is monetary policy?

Monetary policy describes the actions taken by a central bank to influence the availability of money and credit to promote national economic goals.

The Federal Reserve Act of 1913 established the Federal Reserve and gave it the responsibility to set U.S. national monetary policy.


How does the Federal Reserve Board enact economic policy?

The Federal Reserve Board regulates interest rates, keeps prices stable, and maximizes employment. The Federal Reserve is responsible for monetary policy and has three tools at its disposal: open market operations, the discount rate, and reserve requirements. 


What are "open market operations"?

Open market operations refer to the Federal Reserve's sale or purchase of treasury bonds and other agency securities. These purchases control the short-term interest rate and the amount of base money in the economy, and thus indirectly establish control the total money supply.

Open market operations can spur the economy, or be used to restrain the rate of inflation. They are the most common tool used by the Federal Reserve to enact economic policy.


As used by the Federal Reserve, what is the "discount rate"?

The discount rate refers to the interest rate charged to commercial banks when they borrow money from the Federal Reserve, usually overnight.

The discount rate acts as a check on interest rates that in turn impact the interest rates banks charge borrowers.


How does the Federal Reserve use reserve requirements to enact economic policy?

Reserve requirements are the amount of cash a bank must keep on hand. By raising or lowering reserve requirements, the Federal Reserve can increase or decrease the amount of money a bank has available to lend, restricting or loosening the money supply.

The Federal Reserve rarely uses the reserve requirement tool. 


How did Congress ensure that the Federal Reserve would operate as a relatively independent entity?

The seven-member Federal Reserve Board of Governors, appointed by the president and comfirmed by the Senate, serves staggered 14-year terms, after which they are not eligible for reappointment. In addition, neither Congress nor the executive branch exercises any oversight or control over the Federal Reserve's monetary policies.

Small checks on the Federal Reserve's power exist because Congress can impeach a governor, and the president has the power to nominate individuals to vacant seats with the Senate's approval.


fiscal policy

Fiscal policy refers to using the government budget to influence economic activity.


What is the role of the Federal Trade Commission (FTC) in the economy?

The FTC focuses on consumer protection and antitrust laws, including a review of potential mergers between large companies. Both of these roles can have significant effects on the larger economy. FTC compliance can lead to significant costs on companies and the economy. 



Entitlements are programs available to all Americans regardless of means and are a form of social welfare. Entitlement programs include Social Security and Medicare.


means test

By the use of a means test, the government determines whether an individual or family is eligible for government aid or whether they have enough means to do without government assistance.

Means testing is used in most social welfare programs, such as Temporary Assistance to Needy Families, the Section 8 housing program, and the Aid to Families with Dependent Children program.


What is the poverty line?

The poverty line marks the total cost of all essential resources an average American human adult consumes in a year. The poverty line is often used as a component of the means test to determine eligibility for various federal programs.  



Medicare is a national social insurance program that guarantees access to health insurance for Americans aged 65 and older and younger people with disabilities.

Medicare is an entitlement and was enacted as part of President Lyndon Johnson's Great Society programs.



Medicaid is a state-administered health program provided for families and individuals with low incomes and resources. 

Medicaid is a means-tested program jointly funded by the state and federal government.


What law marked the largest regulatory overhaul of the health insurance industry since 1965?

The Patient Protection and Affordable Care Act (also known as "Obamacare") is the largest regulatory overhaul of the health insurance industry in more than half a century. The law forbids health insurers from charging more to people with pre-existing conditions (e.g. cancer), and requires all Americans to have health care or to pay a penalty.

The law also provides for state-level insurance exchanges and means-tested financial assistance based on the poverty line.


What agency is chiefly responsible for advancing the federal government's environmental policies?

The Environmental Protection Agency (EPA) advances the federal government's environmental policy and does so primarily by its rule-making and rule-adjudication roles.


Which act was passed in 1973 to protect imperiled animals threatened with extinction?

In 1973, Congress passed the Endangered Species Act at the urging of President Richard Nixon.

The act empowers the United States Fish and Wildlife Service and the National Oceanic and Atmospheric Administration to protect species from extinction.