CH 30 Flashcards
tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy slows down and restraining aggregate demand when the economy speeds up, without any additional change in legislation
automatic stabilizers
when government spending and taxes are equal
balanced budget
when the federal government spends more money than it receives in taxes in a given year
budget deficit
when the government receives more money in taxes than it spends in a year
budget surplus
fiscal policy that decreases the level of aggregate demand, either through cuts in government spending or increases in taxes
contractionary fiscal policy
a tax imposed on corporate profits
corporate income tax
federal spending and borrowing causes interest rates to rise and business investment to fall
crowding out
the government passes a new law that explicitly changes overall tax or spending levels with the intent of influencing the level or overall economic activity
discretionary fiscal policy
a tax on people who pass assets to the next generation—either after death or during life in the form of gifts
estate and gift tax
a tax on a specific good—on gasoline, tobacco, and alcohol
excise tax
fiscal policy that increases the level of aggregate demand, either through increases in government spending or cuts in taxes
expansionary fiscal policy
the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs
implementation lag
a tax based on the income, of all forms, received by individuals
individual income tax
the time it takes to get a fiscal policy bill passed
legislative lag
or the tax that must be paid on all yearly income
marginal tax rates
the total accumulated amount the government has borrowed, over time, and not yet paid back
national debt
a tax based on the pay received from employers; the taxes provide funds for Social Security
payroll tax
a tax that collects a greater share of income from those with high incomes than from those with lower incomes
progressive tax
a tax that is a flat percentage of income earned, regardless of level of income
proportional tax
the time it takes to determine that a recession has occurred
recognition lag
a tax in which people with higher incomes pay a smaller share of their income in tax
regressive tax
the budget deficit or surplus in any given year adjusted for what it would have been if the economy were producing at potential GDP
standardized employment budget
