| balanced budget | When the government's tax revenues for the year are roughly equal to its expenditures.
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| budget deficit | When the government's expenditures exceed its tax revenues.
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| budget surplus | When the government's tax and other revenues exceed its expenditures.
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| capital-gains tax | The tax that individuals pay on money gained from the sale of a capital asset, such as property or stocks.
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| deficit spending | When the government spends more than it collects in taxes and other revenues.
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| demand-side economics | A form of fiscal policy that emphasizes "demand" (consumer spending). Government can use increased spending or tax cuts to place more money in consumers' hands and thereby increase demand. (See also fiscal policy; supply-side economics.)
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| deregulation | The rescinding of excessive government regulations for the purpose of improving economic efficiency.
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| economic depression | A very severe and sustained economic downturn. Depressions are rare in the United States: the last one was in the 1930s.
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| economic recession | A moderate but sustained downturn in the economy. Recessions are part of the economy's normal cycle of ups and downs.
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| economy | A system of production and consumption of goods and services that are allocated through exchange among producers and consumers.
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| efficiency | An economic principle that holds 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.
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| equity (in relation to economic policy) | 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 knowingly at a disadvantage.
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| externalities | Burdens that society incurs when firms fail to pay the full cost of resources used in production. An example of an externality is the pollution that results when corporations dump industrial wastes into lakes and rivers.
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| fiscal policy | A tool of economic management by which government attempts to maintain a stable economy through its taxing and spending decisions. (See also demand-side economics; monetary policy; supply-side economics.)
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| graduated 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.
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| inflation | A general increase in the average level of prices of goods and services.
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| laissez-faire doctrine | A classic economic philosophy that holds that owners of businesses should be allowed to make their own production and distribution decisions without government regulation or control.
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| monetary policy | A tool of economic management, available to government, based on manipulation of the amount of money in circulation. (See also fiscal policy.)
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| national debt | The total cumulative amount that the U.S. government owes to creditors.
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| policy formation | The stage of the policy process in which a policy is formulated for dealing with a policy problem.
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| policy implementation | The primary function of the bureaucracy; it refers to the process of carrying out the authoritative decisions of Congress, the president, and the courts.
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| policy process | The political interactions that lead to the emergence and resolution of public policy issues.
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| problem recognition | The stage of the policy process whereby conditions in society become recognized as a policy problem.
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| regulation | Government restrictions on the economic practices of private firms.
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| supply-side economics | A form of fiscal policy that emphasizes "supply" (production). An example of supply-side economics would be a tax cut for business. (See also demand-side economics; fiscal policy.)
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