Unit 5 Vocab

full employment

the economic condition when everyone who wishes to work at the going wage-rate for their type of labor is employed

economic depression

Period when business activity slows, prices and wages drop, and unemployment rises

council of economic advisers

a three-member body appointed by the president to advise the president on economic policy


A continuous rise in the price of goods and services

gross domestic product (GDP)

The monetary value of all the finished goods and services produced within a country's borders in a specific time period, usually calculated on an annual basis

balanced budget

A budget in which revenues are equal to spending

budget deficit

Government spending more than it takes in

current account

the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers.

trade deficit

An imbalance in international trade in which the value of imports exceeds the value of exports.

fiscal policy

A government policy for dealing with the budget (especially with taxation and borrowing)

monetary policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

budget making

The processes carried out in Congress to determine how government money will be spent and revenue will be raised.

budget reconciliation

the annual process of rewriting authorization legislation to comply with the expenditure ceiling and revenue floor of the concurrent budget resolution for the upcoming fiscal year

united states trade representative (USTR)

An agency founded in 1962 to negotiate with foreign governments to create trade agreements, resolve disputes, and participate in global trade policy organizations. Treaties negotiated by the USTR must be ratified by the Senate.

National Economic Council (NEC)

a United States government agency in the Executive Office of the President. Created by President Bill Clinton in 1993 by Executive Order, its functions are to coordinate policy-making for domestic and international economic issues, coordinate economic pol

federal reserve system

The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates

treasury department

Created in 1798, the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills

federal reserve board

A seven-member board that sets member banks reserve requirements, controls the discount rate, and makes other economic decisions.

keynesian economics

Theory based on the principles of John Maynard Keynes, stating that government spending should increase during business slumps and be curbed during booms.

supply-side economics

An economic philosophy that holds the 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.

marginal tax rate

The extra taxes paid on an additional dollar of income

business cycle

Recurring fluctuations in economic activity consisting of recession and recovery and growth and decline

mandatory spending

Federal spending required by law that continues without the need for annual approvals by Congress.

discretionary spending

Federal spending on programs that are controlled through the regular budget process


A tax whereby people with lower incomes pay a higher fraction of their income than people with higher incomes.


Average tax rate increases as income rises

monetarist theory

The idea that the amount of money in circulation (the money supply) is the primary influence on economic activity and inflation.

reserve requirment

the regulation that requires a bank to keep a certain percentage if its deposits in its reserve account with the Fed or in vault as vault cash

discount rate

Interest rate the Federal Reserve charges on its loans to member banks

federal funds rate (FFR)

interest rate bank must pay on overnight loans from another bank

open market operations

Buying & selling government securities to change the supply of money

social policy

A national government's course of action designed to promote the welfare of its citizens

new deal

(FDR) , , President Franklin Roosevelt's precursor of the modern welfare state (1933-1939); programs to combat economic depression enacted a number of social insurance measures and used government spending to stimulate the economy; increased power of the

great society

President Johnson called his version of the Democratic reform program the Great Society. In 1965, Congress passed many Great Society measures, including Medicare, civil rights legislation, and federal aid to education.

ownership society

term used to described the social policy vision of george w bush citizens have responsibility for their own social welfare and free market plays a greater role in society

policy agenda

A set of issues and problems that policy makers consider important. The mass media play an important role in influencing the issues which receive public attention.

social security

(FDR) 1935, guaranteed retirement payments for enrolled workers beginning at age 65; set up federal-state system of unemployment insurance and care for dependent mothers and children, the handicapped, and public health


Government aid to the poor

baby boom generation

American generation which was born between the years 1946-1964


To change from government or public ownership or control to private ownership or control.


(LBJ) 1965 , a federal program of health insurance for persons 65 years of age and older


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.

market-based solutions

Reform options for social policies that are based on tax credits, flexible spending accounts, and other approaches that rely on competition in the free market.

income support

government programs that provide support to low income americans such as welfare, food stamps, unemployment compensation, and the earned income tax credit.

aid to families with dependent children (AFDC)

Federal funds, administered by the states, for children living with persons or relatives who fall below state standards of need; abolished in 1996

temporary assistance for needy families (TANF)

Federal legislation that replaces Aid to Families with Dependent Children and whereby government welfare assistance to poor parents is limited to five years for most families with most adult recipients required to find work within two years.

foreign policy

A nation's plan for dealing with other countries around the world.

unilateral action (national)

power that gives the president the ability to create lawful policies without the consent of Congress.

multilateral action

Foreign policy carried out by a nation in coordination with other nations or international organizations.


A national policy of avoiding involvement in world affairs


A national policy of actively trading with foreign countries to foster peace and prosperity


A theory of international relations that focuses on the tendency of nations to operate from self-interest.


A theory of international relations that focuses on the hope the nations will act together to solve international problems and promote peace.


A perspective that emphasizes how different stakeholders in social settings construct their beliefs.

national building

Government policies that are designed to create a sense of national identity.

monroe doctrine

(1823) President James Monroe's statement forbidding further colonization in the Americas and declaring that any attempt by a foreign country to colonize would be considered an act of hostility

cold war

A conflict that was between the US and the Soviet Union. The nations never directly confronted eachother on the battlefield but deadly threats went on for years.


American policy of resisting further expansion of communism around the world

mutually assured destruction

(MAD) if either US or the USSR was hit with a nuclear weapons they would respond with the same

domino theory

A theory that if one nation comes under Communist control, then neighboring nations will also come under Communist control.


A lessening of tensions between U.S. and Soviet Union. Besides disarming missiles to insure a lasting peace between superpowers, Nixon pressed for trade relations and a limited military budget. The public did not approve.

bush doctrine

A policy adopted by the Bush administration in 2001 that asserts America's right to attack any nation that has weapons of mass destruction that might be used against U.S. interests at home or abroad.

national security council (NSC)

An agency in the Executive Office of the President that advises the president on national security

civilian control

Civilian authority should be control the military in order to preserve constitutional government

intergovernmental organizations

combined primarily of sovereign states, agency set up by 2 or more states to carry out projects in common interest

nongovernmental organizations

an organization that is not part of the local or state or federal government

world bank

A specialized agency of the United Nations that makes loans to countries for economic development, trade promotion, and debt consolidation. Its formal name is the International Bank for Reconstruction and Development.

international monetary fund

An international organization of 183 countries, established in 1947 with the goal of promoting cooperation and exchange between nations, and to aid the growth of international trade.

united nations (UN)

An institution dedicated to promoting dialogue among countries with the goal of maintaining world peace


A government tax on imports or exports

world trade organization (WTO)

An international agency which encourages trade between member nations, administers global trade agreements and resolves disputes when they arise.

most-favored-nation status

A clause in a commercial treaty that awards to any later signatories all the privileges previously granted to the original signatories.

kyoto protocol

controlling global warming by setting greenhouse gas emissions targets for developed countries

clash of civilizations

political scientist Samuel Huntington's controversial thesis than in the 21st century the globe's major civilizations will conflict with one another, leading to anarchy and warfare similar to that resulting from conflicts between states over the past 500

weapons of mass destruction

Biological, chemical, or nuclear weapons that can cause a massive number of deaths in a single use.


the government insurance program for low-income individuals & familys that is funded both by the federal government & each individual state