Economics #3 Flashcards
Understand and define fiscal policy.
Fiscal policy is the use of government taxes and spending to alter macroeconomic outcomes.
How the Government receives and spends money?
Fiscal Policy
What proposals have been made to fix fiscal policy and reduce the budget deficit.
- Balanced budget amendment
- Line-Item Veto
- Privatization
- impose a deficit ceiling that is decreased each year until it reaches 0
What is a balanced budget?
a rule requiring that a state can’t spend more than it’s income
What is line-item veto?
authorizes to reject particular provisions of a bill enacted by a legislature without vetoing the entire bill.
what is deficit ceiling
a limit on the amount of money the U.S government is allowed to borrow to pay it’s bills.
Define the barter system and know the limitations of a barter system
Exchanging of one good for another, the limitation is the central requirement is called a double coincidence of demand, because we both want what each other has.
What is barter system?
system of trading goods and services without the use of money
Define money ?
Money is anything people accept in exchange for goods and services,
What gives money value?
The goods and services that it purchases and money is money because people say it’s money
What are the functions of money?
It functions as medium of exchange, standard of value and store of value.
What are the aspects of “good money”?
durable, easy to identify, hard to counterfeit, easy to store, able to control the supply.
What are the forms of our money supply?
We hold it in transactions account savings, checking accounts, cash currency coins.
What is a central bank?
They are the bank for the USA our nation. Also, a financial institution established by government to oversee a nations monetary system
What is legal tender?
The law says must be accepted as payment
What is the number of districts
12
What is fiat money
monetary instruments that has less value as commodities than as money
The Federal Reserve is a banker’s bank. What does this mean?
They are the federal bank that is the banks of all the other banks, they can give out loans and hold deposits for them
Who is the policy-making body for the federal reserve?
The board of Governors
What are the various roles of the federal reserve?
They clear checks for banks, issue paper currency, regulate banks and examines member banks it is a fiscal agent and bank for the U.S treasury, they act as banker’s bank
What are the general powers of the federal reserve?
- Open market operation
- Required reserve ratio
- Discount rate
what is required reserve ratio?
telling banks how much they have to put aside and they can’t touch it
What is open market operations?
the fed can buy and sell already issues federal government debt
What is discount rate?
they are charging interest to the other banks
What actions may the Federal Reserve take during a recession to increase depository institution’s excess reserves?
- They are gonna buy securities on the open market
- Lower the discount rate
- They are gonna set aside less money ; lower the requires reserve ration
