Modules 30-33 Flashcards
An estimate of what the budget balance would be if real GDP were exactly equal to potential output
Cyclically adjusted budget balance
The accumulation of past budget deficits, minus past budget surpluses
Government debt
Runs from October 1 to September 30 and is labeled according to the calendar year in which it ends
Fiscal year
Government debt held by individuals and institutions outside of the government
Public debt
Government’s debt as a percentage of GDP
Debt-GDP ratio
Spending promises made by governments that are effectively a debt despite the fact they are not included in the usual debt statistics
Implicit liabilities
The Fed can move the interest rate through open market operations that shift the money supply curve, in practice, the Fed sets a __ and uses open market operations to achieve that target
Target federal funds rate
Monetary policy that increases aggregate demand
Expansionary monetary policy
Monetary policy that reduces aggregate demand
Contractionary monetary policy
Rule for setting the federal funds rate that takes into account both the inflation rate and output gap
Taylor rule for monetary policy
Occurs when the central bank sets an explicit target for the inflation rate and sets monetary policy in order to hit that target
Inflation targeting
Concept that changes in the money supply have no real effect on the economy
Monetary neutrality
The real quantity of money is always at its long-run equilibrium level
Classical model of the price level
Reduction in the value of money held by the public caused by inflation
Inflation tax
Inflation that is caused by a significant increase in the price of an input with economy-wide importance
Cost-push inflation
Inflation that is caused by an increase in aggregate demand
Demand-pull inflation
