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10 Cards in this Set

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  • Back
Fiscal Policy
The use of government spending and taxes to influence the nation's spending employment, and price level.
Discretionary fiscal policy
The diliberate use of changes in government spending or taxes to alter aggregate demand and stabilize the economy
Spending multiplier (SM)
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
Tax multiplier
The change in aggregate demand (total spending) resulting from an initial change in ta
Balanced budget multiplier
An equal change in government spending and taxes, which changes aggregate demand by the amount of the change in government spending
Automatic Stabilizers
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
Budget surplus
A budget in which government revenues exceed government expenditures in a given time period
Budget deficit
A budget in which government expenditures exceed government revenues in a given time period.
Supply-side fiscal policy
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.
Laffer Curve
A graph depicting the relationship between tax rates and total tax revenus.