chapter 13 Flashcards
Two types of government spending:
purchases of goods and services
government transfers
Big items in government purchases
National defense
Education
Big items in government transfers
Social Security
Medicaid
Medicare
Social Security
Provides guaranteed income to older Americans, disabled Americans, and the surviving spouses and dependent children of decreased or retired beneficiaries
Medicare
Covers much of the cost of health care of Americans over age 65
Medicaid
Covers much of the cost of health care for Americans with low incomes
Social insurance
government programs designed to protect families against economic hardship
Social insurance programs
Social Security
Medicare
Medicaid
Unemployment insurance
food stamps
Expansionary fiscal policy
Fiscal policy that increases aggregate demand:
- An increase in government purchases of goods and services
- A cut in taxes
- An increase in government transfers
Contractionary fiscal policy
The fiscal policy that reduces aggregate demand:
- Reduction in government purchases of goods and services
- An increase in taxes
- Reduction in government transfers
Ricardian equivalence
expansionary fiscal policy will have no effect on the economy because far-sighted consumers will undo any attempts by the government to expand
federal disaster relief
Quickly disburses funds to victims of natural disaster
lump-sum taxes
taxes that dont depend on the taxpayer’s income
Automatic stabilizers
Government spending and taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts and contractionary when the economy expands
Discretionary fiscal policy
Fiscal policy that is the result of deliberate actions by policy makers rather than rules
Savings government
Tax Revenues - Government Purchases - Transfers
T - G - TR
Budget deficit rises with
Recessions
High Unemployment
Budget deficit falls with
expansions
low unemployment
Cyclically adjusted budget balance
An estimate of what the budget balance would be if real GDP were exactly equal to potential output
Fiscal year
U.S. fiscal year runs from October 1 to September 30 and is labeled according to the calender year in which it ends
Public debt
Government debt held by individuals and institutions outside the government
Difference between deficit an debt
Deficit - difference between the amount of money a government spends and the amount it receives in taxes over a given period
Debt - the sum of monye a government owes at a particular point in time
Net public debt
Government debt minus any government assets
Implicit liabilities
Spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics
Dedciated taxes
Their expenses are paid out of special taxes on wages
Social Security and Part of Medicare are supported by these
Fiscal austerity
Cut government spending and raise taxes, to both reduce the need to borrow more funds and to demonstrate to lenders the ability and determination to do what’s necessary to honor its debts
