Ch 13 Flashcards
Fiscal Policy
Deliberate changes in government , control inflation, and encourage economic growth
Council of Economic Advisers (CEA)
A group of 3 economists appointed by the president to provide expertise and assistance on economic matters
Expansionary Fiscal Policy
Government spending increases, tax reductions, or both, designed to increase aggregate demand and therefore raise real GDP
Budget Deficit
Government spending in excess of tax revenues
Contractionary Fiscal Policy
Consists of government spending reductions, tax increases, or both, designed to decreas aggregate demand and therefore lower or eliminate inflation
Budget Surplus
Tax revenues in excess of government spending
Built-in Stabilizers
anything that increases the governments budget deficit (or reduces its budget surplus) during a recession and increases its budget surplus ( or reduces budget deficit)
Cyclically Adjusted Budget
To adjust actual Federal budget deficits and surpluses to account for the changes in tax revenues that happen automatically whenevr GDP changes
Cyclical Deficit
a by-product of the economy’s slide into recession , not the resyld of discressionaty fiscal actions by the government
Political Business Cycle
swings in overall economic activity and real GDP resulting from election-motivated fiscal policy, rahter than from inherent instability in the private sector
Crowding-Out Effect
a rise in interest rates and a resulting decreas in planned investment caused by the Federal government’s increased borrowing to finance budget deficits and refinance debt
Public Debt
essentially the accumulation of all past Federal deficits and surpluses
U.S. Securities
financial instruments issued by the Federal government to borrow money to finance expenditures that exceed tax revenues
External Public Debt
enables foreigners to buy some of out output. Foreign-Owned public debt
Public Investments
increase the economy’s future production capicity
