Chapter 1 Flashcards
Is the means by which a government adjusts its levels of spending in order monitor and influence a nations economy
Fiscal Policy
It is the sister strategy to monetary policy with which a central bank influences a nations money supply
Fiscal policy
Is based on the theories of british economist john maynard keynes
Fiscal policy
A government can use this to increase taxes in order to suck money out of the economy
Fiscal policy
Cpuld also dictate a decrease in government spending and thereby decrease the money in circulation
Fiscal policy
These two policies are used in various combinations in an effort to direct a countrys exonomic goals
Fiscal and monetary policy
Before the great depression in the US, the governments approach to the ecpnomy was
Laissez faire
This theory basically states that governmenta can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending
Keynesian economics
An increase in the supply of money followed by an increase in consumer demand xan result in a
Decrease in the value of money
Pumping money into the economy
Pump priming
The increase in ecpnomic productivity can cross over a very fine line and lead to too much money in the market. This excess in supply decreases the value of money, whilw pushing up price, hence
Inflation occurs
Is typically implemented by a central bank
Monetary policy
Decisions are set by the national government
Fiscal policy
Is expected to improve the economys rate of growth of output in the quarters ahed
Stimulative monetary policy
The growth of output is measured by
GDP
Is designed to slow the economy in the future to offset inflationary pressures
Tight or restrictive monetary policy
Are normally expected to stimulate economic growth in the short run
Stimulative fiscal policies
Tax cuts
Spending increases
Tend to slow the rate of future economic expansion
Tax increases
Spending cuts
Is changes in the taxing and spending of the federal governmwnt for purposes of expanding or contracting the level of aggregate demand
Fiscal policy
Involves lowering taxes and i creasing government spending
Expansionary fiscal policy
Requires higher taxes and reduced spending
Contractionary fiscal policy
According to him, a recession requires deficit spending,while an overheated expansion requires a budget surplus
Keynes
It requires deficit spending
Recession
Requires a budget surplua
Overheated expansion
A recession requires
Deficit spending
An overheated expansion requires
Budget surplus
Types of fiscal policy
Discretionary fiscal policy
Automatic stabilizers or nondiscretionary fiscal policy
The first way this can be done is through the federal budget process
Discretionary fiscal policy
A second type of fiscal policy is built into the structure of federal taxes and spending
Automatic stabilizers
