Key Economic Terms: Fiscal Policy, GDP, and More
Key Economic Terms and Definitions
Fiscal Policy – Government policy that attempts to manage the economy by controlling taxation and spending.
Monetary Policy – An attempt to manage the economy by controlling the money supply and interest rates.
Inflation – A rise in the volume of money and a decrease in the dollar’s value.
Unemployment – Being out of work and actively looking for a job.
Stagflation – Economic slowdown combined with inflation.
GDP (Gross Domestic Product) – The value of all goods and services produced by an economy during a specific time period.
Excise Tax – A consumer tax on a specific kind of merchandise, such as tobacco.
Budget Deficit – When the federal government raises less revenue than it spends.
Tariff – A tax levied on imports to protect a nation’s industries, labor, and farms from foreign competition.
Progressive Tax – A tax system where people with higher incomes pay a larger fraction of their income in taxes.
Regressive Tax – A tax system where people with lower incomes pay a higher fraction of their income in taxes.
National Debt – The total money the federal government has borrowed to finance deficit spending.
OMB (Office of Management and Budget) – A presidential staff agency that serves as a clearinghouse for budgetary requests and management improvements for government agencies.
CBO (Congressional Budget Office) – An agency of Congress that analyzes presidential budget recommendations and estimates the costs of proposed legislation.
Tax Expenditure – The loss of tax revenue due to federal laws that provide special tax incentives or benefits to individuals or businesses.
Sales Tax – A general tax on sales transactions, sometimes exempting food and drugs.
VAT (Value Added Tax) – A tax on the increased value of a product at each stage of production and distribution, rather than just at the point of sale.
Federal Reserve System – Establishes banking practices and regulates currency in circulation and the amount of credit available.
Federal Funds Rate – The amount of interest banks charge for loans to each other.
Laissez-faire Economics – The theory that opposes government interference in economic affairs beyond what is necessary to protect life and liberty.
Keynesian Economics – The theory that government spending should increase during business slumps and be curbed during booms.
Protectionism – A policy of erecting trade barriers to protect domestic industry.
Trade Deficit – An imbalance in international trade in which the value of imports exceeds exports.
WTO (World Trade Organization) – Promotes free trade around the world; it is an international organization.
GATT (General Agreement on Tariffs and Trade) – Encourages free trade by lowering tariffs and other trade restrictions; it is an international agreement.
NAFTA (North American Free Trade Agreement) – An agreement signed by the U.S., Canada, and Mexico to form the largest free trade zone in the world.
Monopoly – Domination of an industry by a single company.
Antitrust Legislation – Federal laws that try to prevent monopolies from restraining trade.
Trust – A monopoly that controls goods and services.
Closed Shop – A company with a labor agreement under which union membership is a condition of employment.
Union Shop – A company where new employees must join the union within a stated time period.
Labor Injunction – A court order forbidding specific individuals or groups from doing things (like striking) that are harmful to the rights and property of an employer or community.
Collective Bargaining – Representatives of the union and employer determine wages, hours, and other conditions of employment through direct negotiation.
Environmental Impact Statement – Required by federal law from all agencies for any project using federal funds to assess the potential effect of new construction or development on the environment.
Corporate Social Responsibility – Efforts by corporations to improve their reputation by paying attention to their contribution to the social good.
Deregulation – Cutbacks in the amount of federal regulation in specific areas of economic activity.