Government and the Economy Flashcards
Define progressive taxes.
higher rate on higher incomes
define proportional taxes.
same rates for all tax payers
“Flat Tax”
define regressive taxes
larger rate on lower incomes
-Portion of income for taxes falls as income rises
define budget deficit
occurs when the government spends more than it brings in
define balanced budget
when revenue equals expenditures
define discretionary spending
-government spending implemented through a bill.
about 1/3 of the national budget
define mandatory spending
-Spending on certain programs that are required by existing law
1/2 of all federal spending and includes entitlements (food stamps, medicare, etc.)
Define budget surplus
occurs when the government takes in more than it spends
define National debt
the total amount of money a government owes
define deficit spending
practices of spending more than what is taken in for a specific budget
reserved requirement ratio
The portion (expressed as a percent) of depositors’ balances banks must have on hand as cash.
discount rate
the minimum interest rate set by the Federal Reserve for lending to other banks
what is the government doing when it issues bonds?
borrowing money from citizens
How can the government slow down the economy?
using a contractionary tool
how can the government expand the economy?
using an expansionary tool
What are public goods and services?
provided by givers and consumed by the public as a whole
What are examples of automatic stabilizers?
public transfer system, progressive income taxes
What are 4 examples of deficit spending?
- National Emergencies (wars, natural disasters)
- Public Goods and Services
- Stabilization of the Economy
- Entitlements
What is the difference between contractionary fiscal policy and expansionary fiscal policy
contractionary try to reduce demand and slow the economy, and expansionary try to increase demand and stimulate the economy.
What is the difference between national debt and deficit spending?
national debt is the total amount of money the government owes and deficit spending is the practice of spending more than what is taken in for a specific budget year
What happens when monetary policy coordinates well with the business cycle?
provides a stable economic environment
