Ch 18

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laissez-faire

A French term meaning "to allow to do, to leave alone." It holds that active governmental involvement in the economy is wrong.
business cycles

Fluctuations between periods of economic growth and recession, or periods of boom and bust.
interventionist state

Alternative to the laissez-faire state; the government took an active role in guiding and regulating the private economy.
deregulation

A reduction in market controls (such as price fixing, subsidies, or controls on who can enter the field) in favor of market-based competition.
gross domestic product (GDP)

The total market value of all goods and services produced in an area during a year.
budget deficit

The economic condition that occurs when expenditures exceed revenues.
inflation

A rise in the general price levels of an economy.
Board of Governors

In the Federal Reserve System, a seven-member board that makes most economic decisions regarding interest rates and the supply of money.
reserve requirements

Government requirements that a portion of member banks' deposits be retained as backing for their loans.
discount rate

The rate of interest at which the Federal Reserve Board lends money to member banks.
recession

A decline in the economy that occurs as investment sags, production falls off, and unemployment increases.