Chapter 11 – Fiscal Policy, Deficits, Surpluses, And Debt

Question 0

Fiscal policy

Answer 0

Changes in government spending and tax collections designed to achieve a full employment and non-inflationary domestic output

Question 1

Keynesian Economics

Answer 1

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.

Question 2

Expansionary fiscal policy

Answer 2

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.

Question 3

Budget deficit

Answer 3

The amount by which the expenditures of the federal government exceeds its revenues in any year

Question 4

Contractionary fiscal policy

Answer 4

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

Question 5

Budget surplus

Answer 5

The amount by which the revenues of the federal government exceed its expenditures in any year

Question 6

Transfer payment

Answer 6

A payment of money by a government to a householder firm for which the pair receive no good or service directly in return

Question 7

Built in stabilizer

Answer 7

A mechanism that increases government budget deficit during a recession and increases government’s budget surplus during inhalation without any action by policymakers

Question 8

Progressive tax

Answer 8

I talked with an average tax rate increases as the taxpayers income increases and decreases as the taxpayers income decreases.

Question 9

Average tax rate

Answer 9

Total tax paid divided by total taxable income, as a percentage

Question 10

Proportional tax

Answer 10

I talked with an average tax rate the remains constant as the taxpayers income increases or decreases

Question 11

Regressive tax

Answer 11

I talked with an average tax rate decreases as the taxpayers income increases and increases as the taxpayers income decreases

Question 12

Discretionary fiscal policy

Answer 12

Deliberate changes in taxes and government spending by Parliament to promote full employment, price stability, and economic growth

Question 13

Cyclically adjusted budget

Answer 13

What the government budget balance would be if the economy were operating at full employment

Question 14

Cyclical deficit

Answer 14

A federal budget deficit that is caused by her session and the consequent decline in tax revenue.

Question 15

Price level stability

Answer 15

Steadiness of the price level from one. To the next; zero or low annual inflation; also called price stability.

Question 16

Political business cycle

Answer 16

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.

Question 17

Crowding out effect

Answer 17

A rising interest-rate and the resulting decrease inclined investment caused by the federal government increased borrowing in the money market

Question 18

Net export effect

Answer 18

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

Question 19

Public debt

Answer 19

The total amount owed by the federal government to the owners of government securities

Question 20

Refinancing the public debt

Answer 20

Paying owners of maturing government securities with money obtained by selling new securities or with new securities

Question 21

Liability

Answer 21

A debt with a monetary value; an amount owed by firm or an individual

Question 22

External public debt

Answer 22

Public debt owed to foreign citizens, firms, and institutions

Question 23

Public investments

Answer 23

Government expenditures on public capital such as roads and highways and on human capital such as education and health