ch 13 fiscal policy Flashcards
refers to the actions by the government to change taxes, spending on goods and services, and transfer payments with a goal of influencing economic conditions
fiscal policy
spending exceeds tax revenue; government spending than it actually has; usually only at the federal government level
deficit
tax revenue exceeds spending
surplus
result of changing government spending
output rises, employment rises, inflation (prices) rises
result of changing taxes
people don’t spend as much; employment, gdp, and prices all fall
payments towards 401k, welfare, social security; income from government
transfer payments
decrease in transfer payments do what
takes income away from people, aggregate demand decreases, real gdp, unemployment, and prices all fall
How government will fiscal policy in recession
Raises Government spending, lowers taxes, increase transfer payments
Can you fix Supply shocks through fiscal policy?
No
What do temporary tax breaks do
no major effects; doesn’t raise production doesn’t reduce unemployment
idea that taxes can increases aggregate supply by creating increased incentives to work save and invest
supply side economics
how does raegonomics work
tax cuts
the idea the government borring most of the money leaving less for the people and business world to borrow
crowding out
Problems with fiscal policy
slow to implement policy, crowding out
the sum of all of the past federal budget defici5ts and surpluses
federal debt
