Chapter 1 Flashcards
is the means by which a government adjusts its levels of spending in order to monitor and influence a nation’s economy.
Fiscal Policy
It is the sister strategy to monetary policy with which a central bank influences a nation’s money supply.
Fiscal Policy
two policies that are used in various combinations in an effort to direct a country’s economic goals.
Fiscal Policy
Monetary Policy
it is the government’s approach to the economy before the Great Depression in the United States
Laissez Faire
British economist, Fiscal Policy is based on his theories
John Maynard Keynes
this theory basically states that governments 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 can result in a decrease in the value of money
Inflation
pumping money into the economy is known as
Pump priming
When inflation is too strong, the economy may need a slowdown.
True
a government can use this policy to increase taxes in order to suck money out of the economy.
Fiscal Policy
Fiscal policy could also dictate a decrease in government spending and thereby decrease the money in circulation.
True
typically implemented by a central bank
Monetary Policy
decisions are set by the national government
Fiscal Policy
is expected to improve the economy’s rate of growth of output (measured by Gross Domestic Product or GDP) in the quarters ahead
Stimulative Monetary Policy
is designed to slow the economy in the future to offset inflationary pressures
Tight or restrictive monetary policy
is changes in the taxing and spending of the federal government for purposes of expanding or contracting the level of aggregate demand.
Fiscal policy
involves lowering taxes and increasing government spending.
Expansionary fiscal policy
requires higher taxes and reduced spending.
Contractionary fiscal policy
According to Keynes, a recession requires
Deficit spending
According to Keynes, an overheated expansion requires a
Budget surplus
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
Automatic stabilizers referred to as
Nondiscretionary fiscal policy
The major source of federal revenue
Progressive income tax
