| A | B |
|---|
| capitalism | economic system based on economic liberty in which producers and consumers are free to choose what to produce, how much to produce, and who gets the products |
| free enterprise | free market economy; capitalism |
| laissez faire | economic freedom; the belief that government should not intervene in the economy |
| socialism | economic system in which the government owns the major factors of production and plans the major decisions in the economy in an attempt to provide for the common good |
| command economy | economic system in which government plans and commands the economy of the nation |
| public property | property owned by the government |
| public goods | products and services that are provided by the government |
| externalities | any effect resulting from economic activity that causes someone who is neither the producer nor the consumer of a product to pay an economic cost OR receive an economic benefit |
| redistribution of wealth | to use legal means to take away wealth from upper income groups and redistribute it amongst lower income groups in an attempt to achieve economic equality |
| transfer payments | redistribution of wealth through the payment of cash, welfare, housing subsidies, unemployment compensation, or any other aid |
| pork barreling | to enact appropriations legislation for the purpose of gaining political support for a particular Senator or Representative in their home district |
| deficit | when a government's expenditures exceed its revenues |
| national debt | the total amount of money that a national government owes to its creditors |
| "crowding out" | an effect created when government borrows money so heavily that demand for money results in increased interest rates, thereby preventing private borrowers from acquiring capital |
| nominal values | measurement that does not take the effect of inflation into account |
| real values | measurement that has been adjusted to take inflation into account |
| leading indicators | economic statistics used to measure the status of the economy |
| Gross Domestic Product (GDP) | the value of all finished products produced in a nation in a given year |
| inflation | a general increase in price levels; makes money worth less |
| deflation | a general decrease in price levels; makes money worth more |
| contraction | point in the business cycle at which economic production and consumption is decreasing |
| recession | point in the business cycle in which the economy is experiencing a contraction |
| trough | point in the business cycle in which economic production and consumption is at a minimum |
| depression | point in the business cycle in which the economy is in a "trough" |
| expansion | point in the business cycle in which economic production and consumption is increasing |
| boom | point in the business cycle in which the economy is experiencing an expansion |
| peak | point in the business cycle in which an economic expansion has reached its highest point |
| monetary policy | government policy that deals with the supply of money |
| fiscal policy | government policy that deals with expenditures (appropriations) and taxation (gathering of revenue) |
| Keynesian economics | economy theory that supports government involvement in the economy; advocates the use of fiscal policy to create deficits in times of contraction/depression and surpluses in times of expansion |
| Supply-side economics | economic theory that supports tax cuts in order to stimulate investment and economic production to boost the economy |
| Federal Reserve | central banking system of the United States |
| discount rate | the interest rate that the Fed charges to its member banks that borrow money from it |
| open market operations | when the Fed buys and sells government securities (bonds) |
| reserve requirement | the portion (%) of a bank's deposits that must be set aside and not loaned out |
| entitlement programs | federal programs created to guarantee specific groups of people that their basic needs will be provided for |
| Social Security | entitlement program designed to provide pensions to the elderly |
| Medicare | entitlement program that provides hospital insurance to the elderly |
| Medicaid | federal program that provides hospital insurance to the poor |
| AFDC | welfare provided to families with children in the form of cash and other transfer payments |
| business cycle | the natural periodic rise and fall of economic production and consumption in the economy |
