Chapter 31 Book Flashcards
Expenditure
The total amount of money a government person or organization spends during a certain period of time
If the economy is operating below its potential output in the short run
Deficits are good and surpluses are bad because deficits increase ex expenditures moving output closer to potential
Deficit
A shortfall of revenues under payments
Surplus
An excess of revenues over payments
Deficit and surplus are both flow concepts: true or false ?
True
A government budget deficit occurs when ?
When expenditures exceed revenues
Fiscal austerity
Increases no taxes and decreasing spending
Structural deficit
The part of a budget deficit that would exist even if the economy were at its potential level of income
Cyclical deficit
The part of the deficit that exists because the economy is operating below its potential output
Actual deficit
Actual = structural deficit + cyclical deficit
Structural deficit
The part of a budget deficit that would exist even if the economy were at its potential level of income
Cyclical deficit
The part of the deficit that exists because the economy is operating below its potential level of output
Another name for cyclical deficit ?
Passive deficit
Cyclical deficit =
Tax rate • (potential output - actual output)
Structural deficit =
Structural deficit = actual deficit - cyclical deficit
