Chapter 15 Flashcards
Fiscal policy
Government spending and revenue collection to influence the economy
Federal budget
Federal government’s revenues and spending for the coming year
Fiscal year
A twelve-month period that can begin on any date
Office of management and budget (OMB)
Government office that manages the federal budget
Congressional budget office (CBO)
Government agency that provides economic data to congress
Appropriations bill
Sets money aside for specific spending
Expansionary policies
Fiscal, like higher spending and tax cuts, encourage economic growth
Contractionary policies
Fiscal, like lower spending and higher taxes, reduce economic growth
Classical economics
Free markets can regulate themselves
Productive capacity
Maximum output that an economy can produce without big increases in inflation
Demand-side economics
Government spending and tax cuts help an economy by raising demand
Keynesian economics
Demand-side, encourage government action to increase or decrease demand and output
Multiplier effect
Every one dollar of government spending creates more than one dollar in economic activity
Automatic stabilizer
Changes automatically depending on GDP and a persons income
Supply-side economics
School of economics that believes tax cuts can help an economy by raising supply
Council of economic advisors (CEA)
Group of three respected economists that advise the president on economic policy
Balanced budget
Revenues are equal to spending
Budget surplus
Government takes more than it spends
Budget deficit
Government spends more than it takes
Treasury bill
Government bond that is repaid within three months to a year
Treasury note
Government bond that is repaid within 2-10 years
Treasury bond
Government bond that can be issued for as long as 30 years
National debt
All money federal government owes to bond holders
Crowding-out effect
Loss of funds for private investment due to government borrowing
