Exam Unit 5 Vocab Flashcards
AD excess
the amount by which aggregate demand must be reduced to achieve full-employment equilibrium after allowing for price-level changes.
AD shortfall
the amount additional aggregate demand needed to achieve full employment after allowing for price level changes.
aggregate demand
total quantity of output demanded at alternative price levels in a given time period, ceteris paribus
aggregate supply
total quantity of output producers are willing and able to supply at alternative price levels in a given time period ceteris paribus
crowding out
a reduction in private sector borrowing (and spending) caused by increased government borrowing.
disposable income
after-tax income of consumers; personal income less personal taxes
equilibrium (macro)
the combination of price level and real output that is compatible with both aggregate demand and supply.
fiscal policy
the use of government taxes and spending to alter macroeconomic outcomes.
fiscal restraint
tax hikes or spending cuts intended to reduce (shift) aggregate demand.
fiscal stimulus
tax cuts or spending hikes intended to increase (shift) aggregate demand.
income transfers
payments to individuals for which no current goods or services are exchanged, such as Social Security, welfare, unemployment benefits.
inflationary GDP gap
the amount by which equilibrium GDP exceeds full employment GDP
marginal propensity to consume
the fraction of each additional (marginal) dollar of disposable income spent on consumption; the change in consumption divided by the change in disposable income.
multiplier
the multiple by which an initial change in aggregate spending will alter total expenditure after an infinite number of spending cycles;
1 / (1-MPC)
recessionary GDP gap
the amount by which equilibrium GDP falls short of full employment GDP
asset
anything having exchange value in the marketplace; wealth
automatic stabilizer
federal expenditure or revenue item that automatically responds countercyclically to changes in national income, like unemployment benefits, income taxes.
budget deficit
amount by which government spending exceeds government revenue in a given time period.
crowding in
an increase in private sector borrowing (and spending) caused by decreased government borrowing.
cyclical deficit
that portion of the budget balance attributable to short run changes in economic conditions.
debt ceiling
an explicit, legislated limit on the amount of outstanding national debt.
debt service
the interest required to be paid each year on outstanding debt.
deficit ceiling
an explicit, legislated limitation on the size of the budget deficit.
discretionary fiscal spending
those elements of the federal budget not determined by past legislative or executive commitments.
external debt
U.S. government debt (treasury bonds) held by foreign households and institutions.
fiscal year
The 12 month period used for accounting purposes; begins Oct. 1 for the federal government.
income transfers
Payments to individuals for which no current goods or services are exchanged, such as Social Security, welfare, unemployment benefits.
internal debt
U.S. government debt (treasury bonds) held by U.S. households and institutions
liability
an obligation to make future payment; debt.
optimal mix of output
the most desirable combination of output attainable with existing resources, technology, and social values.
refinancing
the issuance of new debt in payment of debt issued earlier.
structural deficit
federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy.
treasury bonds
promissory notes (IOUs) issued by the U.S. treasury.
