Krugman Textbook Chapter 13

Question 1

Social Insurance

Answer 1

Government programs - like the Canada/Quebec Pension Plan (CPP/QPP), Old Age Security (OAS), and welfare - intended to protect families against economic hardship.

Question 2

Expansionary Fiscal Policy

Answer 2

Fiscal policy that increases aggregate demand by increasing government purchases, decreasing taxes, or increasing transfers.

Question 3

Contractionary Fiscal Policy

Answer 3

Fiscal policy that reduces aggregate demand by decreasing government purchases, increasing taxes, or decreasing transfers.

Question 4

Lump-Sum Taxes

Answer 4

Taxes that don’t depend on the taxpayer’s income.

Question 5

Automatic Stabilizers

Answer 5

Government spending and taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts and automatically contractionary when the economy expands without requiring any deliberate actions by policy-policy makers. Taxes that depend on disposable income are the most important example of automatic stabilizers.

Question 6

Discretionary Fiscal Policy

Answer 6

Fiscal policy that is the direct result of deliberate actions by policy-makers rather than rules.

Question 7

Cyclically Adjusted Budget Balance

Answer 7

An estimate of what the budget balance would be if real GDP were exactly equal to potential output.

Question 8

Fiscal Year

Answer 8

The time period used for much of the government accounting, running from April 1 to March 31. They are labelled by the calendar year in which they end.

Question 9

Public Debt

Answer 9

Government debt held by individuals and institutions outside e government.

Question 10

Debt-to-GDP Ratio

Answer 10

Government debt as a percentage of GDP, frequently used as a measure of a government’s ability to pay its debts.

Question 11

Implicit Liabilities

Answer 11

Spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics.