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10 Cards in this Set
- Front
- Back
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Fiscal Policy
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The use of government spending and taxes to influence the nation's spending employment, and price level.
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Discretionary fiscal policy
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The diliberate use of changes in government spending or taxes to alter aggregate demand and stabilize the economy
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Spending multiplier (SM)
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The ratio of the change in real GDP to an initial change in any component of aggregate expenditures, including consumption, investment, government spending, and net exports. As a formula, the spending multiplier equals 1/(1-MPC) or 1/MPS
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Tax multiplier
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The change in aggregate demand (total spending) resulting from an initial change in ta
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Balanced budget multiplier
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An equal change in government spending and taxes, which changes aggregate demand by the amount of the change in government spending
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Automatic Stabilizers
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Federaql expenditures and tax revenues that automatically change levels in order to stabilize an economic expansion or contraction; sometimes referred to as nondiscretionary fiscal policy
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Budget surplus
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A budget in which government revenues exceed government expenditures in a given time period
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Budget deficit
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A budget in which government expenditures exceed government revenues in a given time period.
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Supply-side fiscal policy
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A fiscal policy that emphasizes government polices that increase aggregate supply in order to achieve long-run growth in real output, full employment, and a lower price level.
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Laffer Curve
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A graph depicting the relationship between tax rates and total tax revenus.
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