Chapter 11 – Fiscal Policy, Deficits, Surpluses, And Debt Flashcards
Fiscal policy
Changes in government spending and tax collections designed to achieve a full employment and non-inflationary domestic output
Keynesian Economics
The macro economic generalizations that lead to the conclusion that the capitalistic economy is characterized by macro economic instability and that fiscal policy and monetary policy can be used to promote full employment, price level stability, and economic growth.
Expansionary fiscal policy
An increase in government spending a decrease in the taxes or some combination of the two, for the purpose of increasing aggregate demand and expanding real output.
Budget deficit
The amount by which the expenditures of the federal government exceeds its revenues in any year
Contractionary fiscal policy
A decrease in government spending, an increase in taxes, or some combination of the two for the purpose of decreasing aggregate demand and thus controlling inflation
Budget surplus
The amount by which the revenues of the federal government exceed its expenditures in any year
Transfer payment
A payment of money by a government to a householder firm for which the pair receive no good or service directly in return
Built in stabilizer
A mechanism that increases government budget deficit during a recession and increases government’s budget surplus during inhalation without any action by policymakers
Progressive tax
I talked with an average tax rate increases as the taxpayers income increases and decreases as the taxpayers income decreases.
Average tax rate
Total tax paid divided by total taxable income, as a percentage
Proportional tax
I talked with an average tax rate the remains constant as the taxpayers income increases or decreases
Regressive tax
I talked with an average tax rate decreases as the taxpayers income increases and increases as the taxpayers income decreases
Discretionary fiscal policy
Deliberate changes in taxes and government spending by Parliament to promote full employment, price stability, and economic growth
Cyclically adjusted budget
What the government budget balance would be if the economy were operating at full employment
Cyclical deficit
A federal budget deficit that is caused by her session and the consequent decline in tax revenue.
Price level stability
Steadiness of the price level from one. To the next; zero or low annual inflation; also called price stability.
Political business cycle
The alleged tendency of government to destabilize the economy by reducing taxes and increasing government expenditures before elections and then raising taxes and lowering expenditures after elections.
Crowding out effect
A rising interest-rate and the resulting decrease inclined investment caused by the federal government increased borrowing in the money market
Net export effect
The idea that the impact of a change in monetary or fiscal policy will be strengthened or weakened by the consequent change in net exports
Public debt
The total amount owed by the federal government to the owners of government securities
Refinancing the public debt
Paying owners of maturing government securities with money obtained by selling new securities or with new securities
Liability
A debt with a monetary value; an amount owed by firm or an individual
External public debt
Public debt owed to foreign citizens, firms, and institutions
Public investments
Government expenditures on public capital such as roads and highways and on human capital such as education and health
