Pt 3: Chapter 15 Notes Flashcards Preview

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Flashcards in Pt 3: Chapter 15 Notes Deck (32):
1

Does the government have a role in the economy today?

yes

2

What is the government's relationship to the economy in the US?

Government has an important role in regulating economy

3

How is efficiency achieved through government intervention?

- promoting competition
- making business pay for indirect costs
- deregulation and underregulation

4

How is equity achieved through government intervention?

Balance interests of society against the interests of efficiency specific to a certain corporation

5

Output of goods and services being the highest possible given the amount of input used

Economic efficiency

6

Costs of production that are incurred by society

Externality

7

Conservatives tend to value what?

efficiency (over equity)

8

The older wave: This view included dual use of federal lands for recreation and resource use

Conservatism

9

The newer wave: This view includes clean air, water, and land legislation. EPA of 1970, and global warming and energy policy

Environmentalism

10

Which country uses the most CO2 per person?

US

11

How does government promote business?

- government provided loans
- special tax breaks
- subsidies
- traditional services: education, transportation, and defense

12

How does government promote labor?

- National Labor Relations Act of 1935
- minimum wage
- maximum work week
- unemployment benefits
- nondiscriminatory hiring practices

13

How does government promote agriculture?

- Homestead act of 1862
- farm programs to eliminate some farming risk
- federal payments
- american farmers among the most heavily subsidized in the world

14

Federal payments account for more than a ___ of net agricultural income

1/5

15

This emphasizes the consumer (demand) component of the supply-demand equation

Demand-side policy

16

Demand-side policy includes what during economic depression or recession?

Government spending to alleviate it

17

Demand-side policy is generally preferred by who?

Democratic lawmakers

18

Demand-side policy can result in ___ budget deficits and an ____ national debt

Higher budget deficits
Increased national debt

19

This policy emphasizes the business (supply) component of the supply-demand equation

Supply-side policy

20

Supply-side policy includes tax breaks for who ? to encourage business investment with resulting increasing in employment and income

Tax breaks for firms and upper-income individuals

21

Supply-side policy is generally preferred by who?

Republican lawmakers

22

Supply-side policy can result in ____ budget deficits and an increased ____

higher budget deficits
increased national debt

23

During a recession, the demand side would want to do what? the supply side?

Recession:
- demand: increase spending
- supply: cut business taxes

24

In an inflation, the demand side would want to do what? the supply side?

Inflation:
- demand: decrease spending
- supply: increase business taxes

25

Republican and Democratic lawmakers are far apart on how best to deal with recessionary periods, but both parties do what?

enact policies that increase the national debt

26

What is the difference between budget deficit and national debt?

Budget deficit is how much you're short in a fiscal year, national debt is how much you owe in total (sum of all budget deficits and interests incurred)

27

Revenue decisions (taxing and spending) of US

Fiscal policy

28

The money supply (almost exclusively through interest rates)

Monetary policy

29

This entity has control over the money supply by:
- raising/lowering the cash reserve required of member banks
- raise/lower interest rate on member banks

The fed (eral reserve?)

30

The Fed can fight an economic downturn by decreasing interest rate on loans to member banks and buying government securities. They can also do this, which they do when they think the economy is in a bad place

Lower reserve rate

31

Who is responsible for setting monetary policy?

The Federal Reserve

32

What does the fed do to control an inflation, which is the opposite of what they do when fighting an economic downturn?

- Increasing interest rate on loans to member banks
- raising reserve rate
- selling government securities (bonds, notes)