Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Macroecon > Ch12 - Fiscal Policy/Natl Debt > Flashcards

Ch12 - Fiscal Policy/Natl Debt Flashcards

0
Q

What are the two main parts of the govt budget?

A

Outlays (Govt spending) and tax revenue.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

Define Fiscal policy

A

Using changes in govt spending and taxes to affect spending.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the 2 parts of govt spending?

A

Purchases - roads, govt salaries, computers

Transfers - social security, unemployment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the “Budget Deficit/Surplus”?

A

Difference between govt spending and govt income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

G+TR=T

A

Balanced budget

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

G+TR<T

A

Budget surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

G+TR>T

A

Budget deficit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define Recessionary gap.

A

Equilibrium GDP is less than full employment GDP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Define inflationary gap.

A

When Equilibrium GDP is greater than Full employment GDP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How an you create an Expansionary policy?

A

By increasing G or cutting T.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What does an expansionary policy combat?

A

A recessionary gap

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How do you create a contractionary policy?

A

Raising T or cutting G.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What does a contractionary policy combat?

A

Inflationary gap

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

An expansionary policy shifts the aggregate demand curve which way?

A

To the right

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

An contractionary policy shifts the aggregate demand curve which way?

A

To the left.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the 2 effects of expansionary/contractionary policy?

A

Direct effects and multiplier effects

16
Q

What is the formula for the Multiplier?

A

1/(1-MPC)

17
Q

How do you apply the Multiplier (formula)?

A
18
Q

What are the 5 built in stabilizers?

A
  1. Progressive tax rates
  2. Unemployment payments
  3. Personal savings
  4. Credit availability
  5. Other transfer payments
19
Q

Define “Discresionary Fiscal Policy”.

A

Deliberate policy measures by congress and pres to change tax rates and spending.

20
Q

What are the three timing issues associated with Fiscal Policy?

A

Recognition lag
decision lag
Impact lag

21
Q

What is crowding out?

A

G increases and private sector investment drops from increased money demand.

22
Q

What is Debt?

A

Cumulative total of all deficits and any surpluses

23
Q

What is Deficit?

A

Tax revenue is less than spending in a single year.

24
Q

Govt tax revenue>govt spending and transfers (T> G+TR) is what kind of budget?

A

Budget surplus

25
Q

Govt tax revenue< G+TR) is what kind of budget?

A

Budget deficit

26
Q

Define recessionary gap.

A

Actual GDP<Potential (full employment) GDP

27
Q

Define inflationary gap.

A

Actual GDP> potential (full employment) GDP

28
Q

What fiscal policy is used during recessionary gap?

A

Expansionary fiscal policy.

29
Q

What actions are taken for expansionary fiscal policy?

A

Cut taxes and increase gov spending.

30
Q

What fiscal policy is used during an inflationary gap?

A

Contractionary fiscal policy

31
Q

What actions are taken for contractionary policy?

A

Raising taxes and cut govt spending.

32
Q

What is the multiplier formula?

A

1/(1-MPC)

33
Q

What is the formula for change in GDP?

A
34
Q

What are two automatic stabilizers?

A
  1. Progressive tax system (increased income increases tax burden, which slows spending)
  2. Govt spending on unemployment (increased unemployment increases govt spending which cushions the spending decline caused by the fall in income)
35
Q

List the 5 problems with Fiscal policy.

A
  1. Timing-lags (recog, decision, imp)
  2. Political consideration-can only do what has been passed.
  3. Future policy reversal
  4. State and local gov may offset some impact
  5. Crowding out effect
36
Q

How are deficits financed?

A
  1. Borrowing from public (problem of crowding out).

2. Print new money (problem of higher inflation)

37
Q

What is the difference between Debt and Deficit?

A

Deficit - spending greater than tax revenue in a single year.
Debt - cumulative total of all deficits and surpluses.

38
Q

What is the normal payments on debt?

A

Usu. interest paid off (it’s income for many in the future: SSI).

Macroecon (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions