Chapter 15

Question 1

Fiscal policy

Answer 1

Government spending and revenue collection to influence the economy

Question 2

Federal budget

Answer 2

Federal government’s revenues and spending for the coming year

Question 3

Fiscal year

Answer 3

A twelve-month period that can begin on any date

Question 4

Office of management and budget (OMB)

Answer 4

Government office that manages the federal budget

Question 5

Congressional budget office (CBO)

Answer 5

Government agency that provides economic data to congress

Question 6

Appropriations bill

Answer 6

Sets money aside for specific spending

Question 7

Expansionary policies

Answer 7

Fiscal, like higher spending and tax cuts, encourage economic growth

Question 8

Contractionary policies

Answer 8

Fiscal, like lower spending and higher taxes, reduce economic growth

Question 9

Classical economics

Answer 9

Free markets can regulate themselves

Question 10

Productive capacity

Answer 10

Maximum output that an economy can produce without big increases in inflation

Question 11

Demand-side economics

Answer 11

Government spending and tax cuts help an economy by raising demand

Question 12

Keynesian economics

Answer 12

Demand-side, encourage government action to increase or decrease demand and output

Question 13

Multiplier effect

Answer 13

Every one dollar of government spending creates more than one dollar in economic activity

Question 14

Automatic stabilizer

Answer 14

Changes automatically depending on GDP and a persons income

Question 15

Supply-side economics

Answer 15

School of economics that believes tax cuts can help an economy by raising supply

Question 16

Council of economic advisors (CEA)

Answer 16

Group of three respected economists that advise the president on economic policy

Question 17

Balanced budget

Answer 17

Revenues are equal to spending

Question 18

Budget surplus

Answer 18

Government takes more than it spends

Question 19

Budget deficit

Answer 19

Government spends more than it takes

Question 20

Treasury bill

Answer 20

Government bond that is repaid within three months to a year

Question 21

Treasury note

Answer 21

Government bond that is repaid within 2-10 years

Question 22

Treasury bond

Answer 22

Government bond that can be issued for as long as 30 years

Question 23

National debt

Answer 23

All money federal government owes to bond holders

Question 24

Crowding-out effect

Answer 24

Loss of funds for private investment due to government borrowing