20 terms
Enviro + Econ AP Gov
Economy
A system for the exchange of goods and services between the producers of those goods and services and the consumers of them.
Laissez-Faire Economics
A classic economic philosophy holding that owners of business should be allowed to make their own production and distribution decisions without government regulation or control.
Regulation
A term that refers to government restrictions on the economic practices of private firms.
Economic Efficiency
An economic principle holding that firms should fulfill as many of society's needs as possible while using as few of its resources as possible. The greater the output (production) for a given input (for example, an hour of labor), the more efficient the process.
Externalities
Burdens that society incurs when firms fail to pay the full costs of production. An example of an externality is the pollution that results when corporations dump industrial wastes into lakes and rivers.
Deregulation
The rescinding of excessive government regulations for the purpose of improving economic efficiency.
Economic Equity
The situation in which the outcome of an economic transaction is fair to each party. An outcome can usually be considered fair if each party enters into a transaction freely and is not unknowingly at a disadvantage.
Fiscal Policy
A tool of economic management by which government can attempt to maintain a stable economy through its taxing and spending policies.
Economic Depression
A very severe and sustained economic downturn. They are rare in the United States; the last one was in the 1930s.
Economic Recession
A moderate but sustained downturn in the economy. Recessions are part of the economy's normal cycle of ups and downs.
Demand-Side Economics
A form of fiscal policy that emphasizes "demand." Government can use increased spending or tax cuts to place more money in the hands of consumers and thereby increase demand.
Budget Deficit
The situation in which the government's expenditures exceed its tax and other revenues.
National Debt
The total cumulative amount that the U.S. government owes to creditors.
Balanced Budget
The situation in which the government's tax and other revenues for the year are roughly equal to its expenditures.
Budget Surplus
The situation in which the government's tax and other revenues exceed its expenditures.
Supply-Side Economics
A form of fiscal policy that emphasizes "supply." An example of it is a tax cut for business.
Capital-Gains Tax
The tax that individuals pay on money gained from the sale of a capital asset, such as property or stocks.
Progressive Personal Income Tax
A tax on personal income in which the tax rate increases as income increases; in other words, the tax rate is higher for higher income levels.
Monetary Policy
A tool of economic management based on manipulation of the amount of money in circulation.
Inflation
A general increase in the average level of prices of goods and services.