economic depression
a period of high unempoyment and business failures
inflation
price increases that decrease the value of currency
business cycles
expansions and contractions of business activity
aggregate demand
total demand for goods and services in an economy; the income avaliable to consumers, businesses, and government to spend on goods and services
productive capacity
the total value of goods and services that can be produced when the economy is working at full capacity
GDP
the value of all goods and services produced
Keynesian theory
economic theory stating that the government can smooth business cycles by controlling the the level of aggregate demand, which can be controlled by fiscal and monetary policies
fiscal policies
government taxation and spending, which is controlled by the president and Congress
monetary policies
economic policies involving control of, and changes in, the supply of money
defecit financing
kenynesian technique of spending beyond government income to combat an economic slump. Injects extra money into the economy to stimulate aggregate demand.
Council of Economic Advisers (CEA)
group that works within the executive branch to provide advice on maintaining a stable economy
monetarists
those who argue that the government can effectively control the performance of the economy only by controlling the supply of money
supply-side economics
economic policies aimed at increasing the supply of goods (as opposed to decreasing demand); consists mainly of tax cuts for possible investors (the wealthy) and less business regulation
fiscal year
the 12 month period used by the government for accounting purposes
budget authority
amounts that government agencies are authorized to spend on programs
budget outlays
amounts that government agencies are expected to spend in the fiscal year
receipts
how much is expected in taxes and other revenue
public debt
the accumulated sum of past government borrowing owed to lenders outside the government
Office of Management and Budget (OMB)
the budgeting arm of the executive office; prepares the presidents budget
tax committees
the two committees of Congress responsible for raising the revenue with which to run the government
authorization committees
committees of Congress that can authorize spending in their particular areas of responsibility
budget committees
one committee in each house of Congress that supervises a comprehensive budget review process
appropriations committees
committees of Congress that decide which of the programs passed by the authorization committees will actually be funded
Congressional Budget Office (CBO)
the budgeting arm of Congress which prepares alternative budgets to those prepared by the presidents OMB
Gramm-Rudman
popular name for an act passed by Congress in 1985 that sought to lower the national defecit to a specified level each year, cumilating a balanced budget in FY 1991. New reforms and defecit charges were agreed on in 1990.
Budget Enforcement Act (BEA)
1990 law that distinguished between mandatory and discretionary spending
mandatory spending
expidentures required by previous commitments
discretionary spending
federal spending on programs that are controlled through the regular budget process
entitlements
benefits to which every eligible person has a legal right and that the government cannot deny. ex: social security
pay-as-you-go
the requirement that any tax cut or expansion of an entitlement program must be offset by a tax increase, etc.
Balanced Budget Act (BBA)
1997 law that promised to balance the budget by 2002
progressive taxation
system of taxation whereby the rich pay proportionally higher taxes than the poor; used by governments to redustribute wealth to promote economic equality
incremental budgeting
method of budget making that involves adding new funds (increments) onto the amount previously budgeted (last years budget)
earmarks
federal funds appropriated by Congress for use on local projects
uncontrollable outlay
a payment that government must make by law
transfer payment
a payment by government to an individual, mainly by Social Security or unemployment insurance