Chapter 16 Vocabulary

Question 1

involves the use of government budget tools, spending, and taxes to influence the macroeconomy

Answer 1

fiscal policy

Question 2

government programs that automatically implement countercyclical fiscal policy in response to economic conditions

Answer 2

automatic stabilizers

Question 3

occurs when the government decreases spending or increases taxes to slow economic expansion

Answer 3

contractionary fiscal policy

Question 4

occurs when the government increases spending or decreases taxes to stimulate the economy toward expansion (AD/AS model)

Answer 4

expansionary fiscal policy

Question 5

fiscal policy that seeks to counteract business cycle fluctuations

Answer 5

countercyclical fiscal policy

Question 6

when government spending substitutes for private spending, the overall change in aggregate demand dimities (spending down, government spending up)

Answer 6

crowding out

Question 7

illustrates the relationship between tax rates and tax revenue

Answer 7

laffer curve

Question 8

portion of additional income spent on consumption
mpc = change in consumption / change in income

Answer 8

marginal propensity to consume

Question 9

tells us the total impact on spending from an initial change of a given amount
m^s = 1/(1-mpc)

Answer 9

spending multiplier

Question 10

the use of government spending and taxes for this arouse

Answer 10

supply side fiscal policy

Question 11

the effects of fiscal policy may be delayed by lags in recognition, implementation, and impact

Answer 11

lags