A.P. Gov Ch. 18

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