Chapter 16Economic Policy Created by: Batty Stergos!
Budget resolution A proposal submitted by the House and Senate budget committees to their respective chambers recommending a total budget ceiling and a ceiling for each of several spending areas (such as health or defense) for the current fiscal year. These budget resolutions are intended to guide the work of each legislative committee as it decides what to spend in its area.
Budget A document that announces how much the government will collect in taxes and spend in revenues and how those expenditures will be allocated among various programs.
Budget deficit A situation in which the government spends more money than it takes in from taxes and fees.
Budget surplus A situation in which the government takes in more money than it spends.
Economic planning An economic philosophy that assumes that the government should plan, in varying ways, some part of the country’s economic activity. For instance, in times of high inflation, it suggests that the government regulate the maximum prices that can be charged and wages that can be paid, at least in the larger industries. Another form of planning, called industrial policy, would have the government planning or subsidizing investments in industries that need to recover or in new industries that could replace them.
Entitlement A claim for government funds that cannot be abridged without violating the rights of the claimant; for example, Social Security benefits or payments on a contract.
Fiscal policy An attempt to use taxes and expenditures to affect the economy.
Fiscal year (FY) The period from October 1 to September 30 for which government appropriations are made and federal books are kept. A fiscal year is named after the year in which it ends—thus “fiscal 1995” (or “FY 95”) refers to the twelve-month period ending September 30, 1995.
Industrial policy See Economic planning
Keynesianism An economic philosophy that assumes that the market will not automatically operate at a full-employment, low-inflation level. It suggests that the government should intervene to create the right level of demand by pumping more money into the economy (when demand is low) and taking it out (when demand is too great).
Monetary policy An attempt to alter the amount of money in circulation and the price of money (the interest rate) to affect the economy.
Monetarism An economic philosophy that assumes inflation occurs when there is too much money chasing too few goods. Monetarism suggests that the proper thing for government to do is to have a steady, predictable increase in the money supply at a rate about equal to the growth in the economy’s productivity.
Reaganomics The federal economic policies of the Reagan administration, elected in 1981. These policies combined a monetarist fiscal policy, supply-side tax cuts, and domestic budget cutting. Their goal was to reduce the size of the federal government and stimulate economic growth. See also Supplyside theory; Monetarism
Sequester Automatic, across-the-board cuts in certain federal programs that are triggered by law when Congress and the president cannot agree on a spending plan.
Supply-side theory An economic philosophy that holds that sharply cutting taxes will increase the incentive people have to work, save, and invest. Greater investments will lead to more jobs, a more productive economy, and more tax revenues for the government. FIN <3 XD