Chapter 15 - Fiscal Policy Flashcards
Are derived from Keynesian economies, an approach design to lower unemployment and raise output by stimulating aggregate demand. or increasing demand
Fiscal polices
C stands for household or consumer spending, I for investment or business sector, G for the government, M for imports and X for exports. GDP is Gross domestic product, the total output of the enemy.
The Aggregate output-expenditure model or GAP = C+I+(X-M)
argued that unsatble spending by the business, or the investment sector (I) was to blame for the decline of GDP. Lack of spending led to the Great Depression
Keynes
A change in investment spending will have a magnified effect on total spending.
Multiplier
The change in investment spending caused by a change in overall spending.
Accelerator
Are programs that automatically trigger benefits if changes in the economy threaten income.
a change in people’s income
Automatic stabilizers
broad social programs that use established eligibility requirements to provide income supplements.
Entitlement
target producers, who are also suppliers, to stimulate their output, and therefore provide jobs.
increasing production
Supply-side policies
is to reduce the economic role of the federal government.
A goal for supply-siders
Supply-siders think government…
dampens production and slows growth.
tried to shrink the government, but was unsuccessful but lower taxes increased income.
President Reagan
Supply-siders think lower tax rate will…
allow individuals to keep more of the money they earned.
illustrates a possible 2 billion gain in income tax after rates were reduced.
Laffer Curve
Supply-siders want
deregulation,** relaxing or removing government regulations.**
Supply-siders think lower tax rates and reduced regulation…
will allow economic growth
