| economic policy | a government's body of diverse policies geared toward promoting the nation's economic health
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| American dream | the belief that in the United States hard work and persistence will reap a financially secure, happy, and healthy life, with upward social mobility
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| tax base | the overall wealth (income and assets of citizens and corporations) that the government can tax to raise revenue
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| economy | a system for producing, distributing, and consuming goods and services
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| pure capitalist economy | an economy in which private individuals and companies own the modes of producing goods and services, and the government does not enact laws aimed at influencing the marketplace transactions that distribute those goods and services
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| regulated capitalist economy (mixed economy) | an economy in which the government enacts policies to influence the health of the economy
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| laissez-faire | hands-off stance of a government in regard to the marketplace
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| income inequality | the gap in the proportion of national income held by the richest compared to that held by the poorest
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| balanced budget | a budget in which the government's expenditures are equal to or less than its revenues
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| deficit spending | government expenditures costing more than is raised in taxes, leading to borrowing and debt
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| Keynesian economics | theory that recommends that during a recession the national government should increase its spending and decrease taxes, and during a boom, it should cut spending and increase taxes
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| recession | an economic downturn during which unemployment is high and the production of goods and services is low
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| depression | a long-term and severe recession
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| economic boom | rapid economic growth
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| fiscal policy | government spending and taxing and their effect on the economy
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| supply-side economics | theory that advocates cutting taxes and deregulating business to stimulate the economy
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| deregulation | reduction or elimination of regulatory restrictions on firms and industries
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| national debt | the total amount of money the national government owes to its creditors
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| monetarism | theory that says the government's proper economic role is to control the rate of inflation by controlling the amount of money in circulation
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| inflation | the decreased value of money as evidenced by increased prices
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| gross domestic product (GDP) | the total value of all goods and services produced within a country's borders
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| consumer price index (CPI) | the most common measure of inflation, it gauges the average change in prices over time of a "market basket" of goods and services including food, clothing, shelter, fuels, transportation costs, and selected medical costs
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| Human Development Index (HDI) | UN-created measure to determine how well a country's economy is providing for a long and healthy life, educational opportunities, and a decent standard of living
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| real income | earned income adjusted for inflation
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| household income | total pretax earnings of all residents over the age of 15 living in a home
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| median household income | the middle of all household incomes—50 percent of households have incomes less than the median and 50 percent have incomes greater than the median
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| poverty | the condition of lacking sufficient income to purchase the necessities for an adequate living standard
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| poverty rate | proportion of the population living below the poverty line as established by the national government
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| poverty thresholds | an annually updated set of income measures (adjusted for family size) that defines who is living in poverty
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| fiscal year (FY) | the twelve-month accounting period for revenue raising and spending, which for the national government begins on October 1 and ends on September 30 of the following year
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| progressive tax | a tax that takes a larger percentage of the income of wealthier taxpayers and a smaller percentage of the income of lower-income taxpayers
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| proportional tax (flat tax) | a tax that takes the same percentage of each taxpayer's income
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| regressive tax | a tax that takes a greater percentage of the income of lower-income earners than of higher-income earners
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| tax expenditures | also called tax breaks or loopholes; government financial supports that allow individuals and corporations to pay reduced taxes, to encourage behaviors that foster the public good
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| budget authority | authority provided by law for agencies to spend government funds
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| discretionary spending | payment on programs for which Congress and the president must approve budget authority each year in appropriation legislation
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| mandatory spending | government spending for debt and programs whose budget authority is provided in legislation other than annual appropriation acts; this budget authority is open ended, obligating the government to pay for the program as long as it exists
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| executive budget | the budget document and budget message that explains the president's fiscal plan
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| concurrent budget resolution | document approved by the House and Senate at the beginning of their budget process that establishes a binding expenditure ceiling and a binding revenue floor as well as proposed expenditure levels for major policy categories
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| 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
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| continuing resolution | an agreement of the House and Senate that authorizes agencies not covered by approved appropriation laws to continue to spend money within their previous budget year's levels
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| budget surplus | money left over after all expenses are paid
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| budget deficit | more money spent than collected through revenues
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| monetary policy | the body of government policies, controlled by the Federal Reserve System, aimed at influencing the supply of money in the marketplace to maintain price stability
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| business regulation | government rules, regulations, and standards directed at protecting competition in the marketplace
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| social regulation | government rules and regulations aimed at protecting workers, consumers, and the environment from market failure
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| global economy | the worldwide economy created by the integration and interdependence of national economies
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| trade policy | a collection of tax laws and regulations that supports the country's international commerce
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| protectionist trade policy | establishment of trade barriers to protect domestic goods from foreign competition
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| tariff | a special tax on imported goods
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| nontariff trade barriers | business and social regulations as well as subsidies aimed at creating a competitive advantage in trade
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| subsidy | a tax break or another kind of financial support that encourages behaviors the government deems beneficial to the public good
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| free trade policy | elimination of tariffs and nontariff trade barriers so that international trade is expanded
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| trade deficit | a negative balance of trade in which imports exceed exports
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