CH 30

Question 1

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

Answer 1

automatic stabilizers

Question 2

when government spending and taxes are equal

Answer 2

balanced budget

Question 3

when the federal government spends more money than it receives in taxes in a given year

Answer 3

budget deficit

Question 4

when the government receives more money in taxes than it spends in a year

Answer 4

budget surplus

Question 5

fiscal policy that decreases the level of aggregate demand, either through cuts in government spending or increases in taxes

Answer 5

contractionary fiscal policy

Question 6

a tax imposed on corporate profits

Answer 6

corporate income tax

Question 7

federal spending and borrowing causes interest rates to rise and business investment to fall

Answer 7

crowding out

Question 8

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

Answer 8

discretionary fiscal policy

Question 9

a tax on people who pass assets to the next generation—either after death or during life in the form of gifts

Answer 9

estate and gift tax

Question 10

a tax on a specific good—on gasoline, tobacco, and alcohol

Answer 10

excise tax

Question 11

fiscal policy that increases the level of aggregate demand, either through increases in government spending or cuts in taxes

Answer 11

expansionary fiscal policy

Question 12

the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs

Answer 12

implementation lag

Question 13

a tax based on the income, of all forms, received by individuals

Answer 13

individual income tax

Question 14

the time it takes to get a fiscal policy bill passed

Answer 14

legislative lag

Question 15

or the tax that must be paid on all yearly income

Answer 15

marginal tax rates

Question 16

the total accumulated amount the government has borrowed, over time, and not yet paid back

Answer 16

national debt

Question 17

a tax based on the pay received from employers; the taxes provide funds for Social Security

Answer 17

payroll tax

Question 18

a tax that collects a greater share of income from those with high incomes than from those with lower incomes

Answer 18

progressive tax

Question 19

a tax that is a flat percentage of income earned, regardless of level of income

Answer 19

proportional tax

Question 20

the time it takes to determine that a recession has occurred

Answer 20

recognition lag

Question 21

a tax in which people with higher incomes pay a smaller share of their income in tax

Answer 21

regressive tax

Question 22

the budget deficit or surplus in any given year adjusted for what it would have been if the economy were producing at potential GDP

Answer 22

standardized employment budget