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public policy

a law, rule, statute, or edcit that expresses the government's goals and provides for rewards and punishments to promote their attainment


the difference between the private and social costs of economic behavior


the existence in a market of a single firm that provides all the goods and services of that market; the absence of competition

market failure

an instance where the market fails to produce an efficient outcome


the confiscation of property with or without compensation

eminent domain

the right of the government to take private property for public use, with reasonable compensation awarded for the property


a national policy, also known as squatting, that permitted people to gain ownership of property by occupying public or unclaimed land, living on it for a specified period of time, and making certain minimal improvements on it

categorical grants-in-aid

funds given by Congress to states and localities that are earmarked by law for specific categories or purposes


governmental grants of cash or other valuable commodities such as land to individuals or organizations. Subsidies can be used to promote activities desired by the government, reward political support, or buy off political opposition

contracting power

the power of government to set conditions on companies seeking to sell goods or services to government agencies


a legistlative practice wherein reciprocal agreements are made between legislators, usually in voting for or against a bill. In contrast to bargaining, logrolling unites parties that have nothing in common but their desire to exchange support

antitrust policy

government regulation of large businesses that have established monopolies


the policy of reducing or eliminating regulatory restraints on the conduct of individuals or private institutions


a particular use of governmental power in which the government adopts rules imposing restrictions on the conduct of private citizens

administrative regulation

the rules made by regulating agencies and commission

monetary policies

efforts to regulate the economy through manipulation of the supply of money and credit. America's most powerful institution in the area of monetary policy is the Federal Reserve Board.

Federal Reserve System (Fed)

Consisting of twelve Federal Reserve Banks, the Fed facilitates the exchanges of cash, checks and credit; it regulates the member banks; and it uses monetary policies to fight inflation and deflation

discount rate

the interest rate charged by the Federal Reserve when commercial banks borrow to expand their lending operationsl. The discount rate is an effective tool of monetary policy.

reserve requirement

the amount of liquid assets and ready cash that the Federal Reserve requires banks to hold to meet depositors' demands for their money. The ration fluctuates from above to below 20 percents of all deposits, with the rest being available for new loans

open-market operations

the process whereby the Federal Open Market Committee of the Federal Reserve buys and sells government securities and the like to help finance government operations and loosen or tighten the total amount of credit circulating in the economy

federal funds rate

the interest rate on loans between banks that the Federal Reserve Board influences by affecting the supply of money available

fiscal policies

the use of taxing, monetary, and spending powers to manipulate the economy

progressive taxation

taxation that hits lower income brackets more heavily

regressive taxation

taxation that hits lower income brackets more heavily

policy of redistribution

an objective of the graduated income tax whereby revenue is raised in such a way as to reduce the disparity of wealth between the lowest and highest income brackets

budget deficit

the amount by which government spending exceeds government revenue in a fiscal year

mandatory spending

Federal spending that is made up of "uncontrollables"


Budgetary items that are beyond the control of budgetary committees and can be controlled only by substantive legislative action in Congess. Some uncontrollables, such as the interest on the debt, are beyond the control of Congress because the terms of payments are set in contracts

discretionary spending

Federal Spending on programs that are controlled through the regular budget process

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