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13 Cards in this Set
- Front
- Back
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Non-discretionary is the policy that ____ happens |
automatically |
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-Government already automatically less is taken out of economy by government -Tax revenues decline automatically, pushes budget into deficit |
Automatic stabilizer |
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What do balanced budget requirements take away? |
the stabilizing effect (non-discretionary) |
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what is the marginal propensity to consume (MPC) |
fraction of each additional dollar you spend (bigger than 0, less than 1) |
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What is the marginal propensity to save? |
1-mpc |
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What is the multiplier effect |
initial change in spending x 1/1-mpc
= total change in demand
(example problem in notes) |
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The higher the MPC... |
the more higher the multiplier effect the more people are spending |
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What is our debt right now |
18 trillion |
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What is the difference with the States budget compared to the federal? |
it has to be balanced -revenus: sales tax, income tax expedentures: education, hospitals |
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The automatic stabilizer pushes the budget into ____
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Deficit
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Rule that sets the federal funds rate according to the level of inflation rate and either the output gap or unemployment rate
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Taylor Rule for monetary policy
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What does money neutrality mean
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Changes in money supply have no real effects on the economy
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When is money neutral?
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In the long run
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