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Boston University
Political Science
CAS PO 111
Graham Wilson

capitalist economies: open markets, privatization laissez faire: “invisible hand,” markets are the answer efficient market hypothesis: markets absorb info about securities into their prices depression: high unemployment and business failures, downturn in a business cycle inflation: price increases linked to a decrease in the value of currency stagflation: slow growth, unemployment, and inflation demand: income that consumers, business, and government wish to spend productive capacity: value of goods and services that can be produced GDP: actual value of the goods and services produced in a year fiscal policies: changes in government spending and taxing monetary policies: Fed- money supply deficit financing: spending beyond government income to combat an economic slump- increase demand for goods interest rate: inversely related to prices of bonds/securities federal funds rate: what banks charge one another for overnight loans discount rate: interest rate that member banks have to pay to borrow money from a Fed bank reserve requirement: amount of cash that member bans must keep on deposit. increase in reserve requirement=lower available $ to lend supply-side economics: inflation can be lowered more effectively by increasing the supply of goods- favor tax cuts to stimulate investment and deregulation (trickle down) Reaganomics: tax cuts, deregulation, cuts in social welfare, increases in defense spending in the 80s, huge deficit tax committees: Ways and Means (house) Finance (senate)- all proposals for taxes, tariffs, and other receipts authorization committees: authorizes spending- each pores over the portions of the budget that pertain to its area of responsibility (20 in house, 15 in senate) appropriations committees: decide which of the programs approved by the authorization committees will actually be funded CBO: supplies budgetary expertise equal to the president’s OMB so it can prepare credible alternative budgets for Congress progressive taxing: redistributes wealth; more brackets=more progressive because the higher brackets are taxed more incremental budgeting: bureaucrats ask for the amount they got currently plus some increase for new projects earmark: federal funds appropriated by Congress for local use discretionary outlays: payments made by legislator’s choice mandatory outlays: payments that must be made by law- entitlements, Medicare, VA; uncontrollable unless the law changes transfer payment: payment made by government to an individual, mainly through SS or unemployment insurance regressive taxing: flat rate (sales tax, etc) distributive policies: allocates resources to confer a benefit on a particular institution or group redistributional policies: take government resources (such as tax funds) from one sector of society to another regulation: government intervention in the owrkings of a
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