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16 Cards in this Set
- Front
- Back
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Fiscal policy |
Changes in government spending and tax collections designed to achieve full-employment and noninflationary domestic output |
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Employment Act of 1946 |
Commits Federal government to use all practicable means to take action through monetary and fiscal policy to maintain economic stability |
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Council of Economic Advisers (CEA) |
Assist and advise the president on economic matters |
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Expansionary fiscal policy |
Occurs during a recession; an increase in G, decrease in net taxes, for the purpose of increasing AD and expanding real output |
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Budget deficit |
Government spending in excess of tax revenues |
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Contractionary fiscal policy |
Occurs with demand-pull inflation; decrease G, raise taxes, decreasing AD and controlling inflation |
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Budget surplus |
Tax revenues in excess of government spending |
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Built-in stabilizer |
Anything that increases the government's budget deficit during a recession and increases its budget surplus during inflation without requiring explicit action by policymakers |
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Progressive tax system |
Average tax rates rises with GDP |
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Proportional tax system |
Average tax rate remains constant as GDP rises |
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Regressive tax system |
Average tax rate falls as GDP rises |
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Full-employment budget |
Adjust the actual Federal budget deficits and surpluses to eliminate the automatic changes in tax revenues |
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Cyclical deficit |
A Federal budget deficit that is caused by a recession and the consequent decline in tax revenue |
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Political business cycle |
The alleged tendency of Congress to destabilize the economy by reducing taxes and increasing goverent expenditures before elections and to raise taxes and lower expenditures after elections |
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Crowding-out effect |
Rise in interest rates and a resulting decrease in planned investment caused by fiscal policy, weakening/canceling the stimulus of the expansionary policy |
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Net export effect |
The idea that the impact of a change in monetary or fiscal policy will be strengthened or weakened by the consequent change in net exports |
