Economics Test 4
balanced budget
A budget in which revenues are equal to spending.
Import
A good that is brought in from another country for sale
Export
A good that is sent to another country for sale
Medicare
A national health insurance program that helps pay for health care for people over age 65 or who have certain disabilities
Infant industry
A new industry
Inside lag
Delay in implementing monetary policy
Medicaid
Entitlement program that benefits low-income families, some people with disabilities, and elderly people in nursing homes
Interest rates
Money earned by deposited funds
Social security
Old-Age, Survivors, and Disability Insurance
Specialization
The concentration of the productive efforts of individuals and firms on a limited number of activities
Functions of the banks that make up the core of the Federal Reserve System.
The district banks that make up the core of the Federal Reserve System carry out several important functions including providing banking and fiscal services to the federal government, providing banking services to member and nonmember banks, regulating the banking industry, and tracking and managing the national money supply to meet current demand and to stabilize the economy.
Trade barriers take three common forms. Name and describe them.
The three common forms of trade barriers are import quotas, voluntary export restraints, and tariffs. Import quotas are the limit on the amount of a good that can be imported. Voluntary export restraints is a self-imposed limitation on the number of products that are shipped to a particular country. A country voluntarily decreases its exports in an attempt to reduce the chances that the importing country will set up trade barriers. Tariffs are taxes on imported goods. Both individuals and businesses have to pay tariffs.
Outside lag
The time it takes for monetary policy to have an effect
Federal Reserve District
The twelve banking districts created by the Federal Reserve Act
What was the reasoning behind the creation of the Federal Reserve System?
To help provide solutions to to the nation's banking problems, and avert bank runs or panics.
Net worth
Total assets minus total liabilities
The Federal Reserve has three tools for adjusting the amount of money in the economy. List them.
open market operations, discount rate, and money creation.
List the arguments in favor of protectionism
protecting workers' jobs, protecting infant industries, and safeguarding national security.
What are characteristics of a good tax?
simplicity, efficiency, certainty, and equity.
Regression
tax for which the percentage of income paid in taxes decreases as income increases
Proportional tax
A tax for which the percentage of income paid in taxes remains the same for all income levels
Customs duty
A tax on certain items purchased abroad
Tariff
A tax on imported goods
WTO
A worldwide organization whose goal is freer global trade and lower tariffs
NAFTA
Agreement that will eliminate all tariffs and other trade barriers between Canada, Mexico, and the Unite States
Appreciation
An increase in the value of a currency
Explain what is meant by a strong or a weak dollar. How does a strong or weak dollar affect prices of imports and exports?
An increase in the value of a currency is called appreciation. When a currency appreciates, it becomes "stronger." A decrease in the value of a currency is called depreciation. A dollar that is deprecation or "weakening" is considered a weak dollar. A strong dollar can cause that nation's products to become more expensive in other countries. However, a strong dollar means that imported goods will be less expensive for that country. On the other hand, a weak dollar causes that nation's products to become cheaper to other nations. At the same time, other nations' products become more expensive and imports to that country will likely decrease.
Taxable income
Income on which tax must be paid; total income minus exemptions and deductions
Revenue
Income received by a government from taxes and nontax sources
What are inside lags and why do they occur?
Inside lags are delays in implementing monetary policy. They occur for two reasons. First, it takes time to identify and recognize a problem. Second, one a problem has been recognized, it can take additional time to enact appropriate policy.
Prime rate
Rate of interest banks charge on short-term loans to their best customers
Personal exemptions
Set amount that you subtract from your gross income for yourself, your spouse, and any dependents
Entitlements
Social welfare program that people are "entitled" to if they meet certain eligibility requirements.
Absolute advantage
The ability to produce more of a given product using a given amount of resources.
Monetary policy
The actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy
Open market operations
The buying and selling of government securities to alter the supply of money
Balance of trade
The relationship between a nation's imports and exports
How would you describe the balance of trade in the United States? ?
Unbalanced. The United States is both the world's leading exporter and importer, but we import far more than we export leading to a trade deficit.
Deductions
Variable amounts that you can subtract, or deduct, from your gross income.
List four areas on which state tax dollars are spent.
education, public safety, arts and recreation, and highways and transportation