Questions and Answers
What is mandatory spending?
What does discretionary spending refer to?
What is an entitlement?
The fact of having a right to something.
What is Medicare?
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What is fiscal policy?
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What is a balanced budget?
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What is hyperinflation?
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What is the role of the Congressional Budget Office?
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Medicaid assists low-income families in paying for ______.
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What is the national debt?
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What are treasury bonds?
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What is the crowding out effect?
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Study Notes
Government Spending
- Mandatory Spending: Required government spending on certain programs established by law, including entitlement programs; does not require annual appropriations.
- Discretionary Spending: Optional government spending that is determined through appropriations bills, including non-entitlement programs where funding can vary.
- Entitlement: Refers to rights individuals have to certain benefits or services under specific programs.
Key Social Programs
- Medicare: Single-payer national social insurance program in the U.S., established in 1966, designed for individuals aged 65 and older and some younger people with disabilities.
- Medicaid: Health care program assisting low-income families or individuals with long-term medical and custodial care costs.
Fiscal Policy
- Fiscal Policy: The use of government revenue collection and spending to influence the economy.
- Federal Budget: For fiscal year 2015, the U.S. federal budget was $3.8 trillion, approximately 21% of the economy, equating to about $12,000 per citizen.
Budget Concepts
- Fiscal Year: A one-year period used for taxing or accounting purposes.
- Office of Management and Budget: Largest office within the Executive Office of the U.S. President, focused on developing and executing the federal budget.
- Congressional Budget Office: Federal agency providing budget and economic data to Congress.
Legislation and Economic Policies
- Appropriations Bill: Law authorizing government expenditure; ensures legislative approval for specific spending.
- Expansionary Policies: Macroeconomic measures to increase the money supply, stimulate economic growth, and combat inflation, including tax cuts and increased spending.
- Contraction Policy: Monetary policy aimed at reducing the money supply to control inflation, potentially leading to higher unemployment and decreased economic growth.
Economic Theories
- Classical Economics: Economic school of thought that flourished in the late 18th to mid-19th century, focusing on free markets and self-regulating economies.
- Demand Side Economics: Advocates for boosting economic activity by increasing the purchasing power of lower and middle classes to stimulate demand for goods and services.
- Keynesian Economics: Theory emphasizing the influence of aggregate demand on economic activity, particularly during recessions.
Economic Indicators and Effects
- Multiplier Effect: Factor measuring the change in an endogenous variable in response to a change in an exogenous variable.
- Automatic Stabilizers: Economic policies that automatically offset fluctuations in economic activity without government intervention.
Borrowing and Debt
- National Debt: As of January 2016, the national debt held by the public was $13.62 trillion, approximately 75% of GDP, with total gross national debt at $18.96 trillion, or roughly 104% of GDP.
- Crowding Out Effect: Occurs when increased interest rates reduce private investment spending, which can dampen total investment increases.
Government Securities
- Treasury Bill: Short-dated government security issued at a discount, yielding no interest but redeemable at face value.
- Treasury Note: U.S. government debt security with fixed interest rates and maturities of one to ten years.
- Treasury Bond: Long-term government bond issued by the U.S. Treasury.
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Description
Test your knowledge on key terms related to mandatory and discretionary spending in U.S. fiscal policy. This quiz covers essential concepts that are crucial for understanding government spending regulations. Perfect for students looking to grasp the nuances of public finance.
