Ch 12 - Deficits and Debt Flashcards
fiscal policy
the use of government taxes and spending to alter macroeconomic outcomes
deficit spending
the use of borrowed funds to finance government expenditures that exceed tax revenues
budget deficit
amount by which government spending exceeds government revenue in a given time period
budget surplus
an excess of government revenues over government expenditures in a given time period
fiscal year (FY)
the 12-month period used for accounting purposes; begins October 1 for the federal government
discretionary fiscal spending
those elements of the federal budget not determined by past legislative or executive commitments
fiscal restraint
tax hikes or spending cuts intended to reduce (shift) aggregate demand
fiscal stimulus
tax cuts or spending hikes intended to increase (shift) aggregate demand
income transfers
payments to individuals for which no current goods or services are exchanged, such as Social Security, welfare, unemployment benefits
automatic stabilizer
federal expenditure or revenue item that automatically responds counter-cyclically to changes in national income, like unemployment benefits, income taxes
cyclical deficit
that portion of the budget balance attributable to short-run changes in economic conditions
structural deficit
federal revenues at full-employment minus expenditures at full-employment under prevailing fiscal policy
crowding out
a reduction in private-sector borrowing (and spending) caused by increase government borrowing
opportunity cost
the most desired goods or services that are forgone in order to obtain something else
crowding in
an increase in private-sector borrowing (and spending) caused by decreased government borrowing
