Chapter 4 Flashcards
Debt
The amount a government owes to those who have loaned
it money.
Deficit
The amount by which a government’s spending exceeds
its revenues in a given year.
The budget process distinguishes between two types of federal spending. They are?
Entitlement Spending and Discretionary Spending
Entitlement Spending
Mandatory funds for programs for which funding levels are automatically set by the number of eligible recipients, not the discretion of Congress.
Discretionary spending
Optional spending set by appropriation levels each year, at Congress’s discretion.
Budget Policies at the state level
1) balanced budget requirement (BBR)
2) ex post BBR
3) ex ante BBR
balanced budget requirement (BBR)
A law forcing a given government to balance its budget each year (spending = revenue).
ex post BBR
A law forcing a given government to balance its budget by the end of each fiscal year.
ex ante BBR
A law forcing either the governor to submit a balanced budget or the legislature to pass a balanced budget at the start of each fiscal year, or both.
real prices
Prices stated in some constant year’s dollars.
nominal prices
Prices stated in today’s dollars.
Consumer Price Index (CPI)
An index that captures the change over time in the cost of purchasing a “typical” bundle of goods.
standardized (structural) budget deficit
A long-term measure of the government’s fiscal position, with short- term factors removed.
cyclically adjusted budget deficit
A measure of the government’s fiscal position if the economy were operating at full potential GDP.
cash accounting
A method of measuring the government’s fiscal position as the difference between current spending and current revenues.
capital accounting
A method of measuring the government’s fiscal position that accounts for changes in the value of the government’s net asset holdings.
What are some issues with capital budgeting?
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static scoring
A method used by budget modelers that assumes that government policy changes only the distribution of total resources, not the amount of total resources.
dynamic scoring
A method used by budget modelers that attempts to model the effect of government policy on both the distribution of total resources and the amount of total resources.
implicit obligation
Financial obligations the government has in the future that are not recognized in the annual budgetary process.
present discounted value (PDV)
The value of each period’s dollar amount in today’s terms.
the generational accounting method
budget measure was designed to assess the implications of the government’s current (or proposed) fiscal policies for different generations of taxpayers.
What question does generational accounting answer
How much does each generation of taxpayers (those born in different years) benefit, on net, from the government’s spending and tax policies, assuming that the budget is eventually brought into long-run balance?
short-run stabilization issues
The role of the government in combating the peaks and troughs of the business cycle.
