Economics C15: Fiscal Policy

Front 1

What is Fiscal Policy?

Back 1

The use of government spending & revenue collection to influence the economy

Hint 1

F_____ P____ decisions include how much to spend & how much to tax decided yearly.

Front 2

What is the Federal Budget?

Back 2

A plan for the federal government's revenues and spending for the coming year.

Hint 2

written document indicating the amount of money the gov. expects to receive for a certain year & amount gov. can spend for that year

Front 3

What is a Fiscal Year?

Back 3

A twelve-month period that can begin on any date.

Hint 3

The F____ Y____ runs from October 1st through September 30th

Front 4

What is the Office of Management and Budget (OMB)?

Back 4

Government office that manages the federal budget.

Hint 4

Part of the Executive Office of the President

Front 5

What is the Congressional Budget Office (CBO)?

Back 5

Government agency that provides economic data to Congress.

Hint 5

Created in 1974 to give Congress independent economic data to help with its decisions.

Front 6

What is an Appropriations Bill?

Back 6

A bill that sets money aside for specific spending.

Hint 6

submitted by Appropriations Committees to each house of Congress authorizing specific spending to be submitted to President.

Front 7

What are Expansionary Policies?

Back 7

Fiscal policies, like higher
spending and tax cuts, that encourage economic growth

Hint 7

Used to increase economic output of nation

Front 8

What are Contractionary Policies?

Back 8

Fiscal policies, like lower spending, and higher taxes tha reduce economic growth.

Hint 8

Used to decrease economic output of nation

Front 9

What is Classical Economics?

Back 9

The idea that free markets can regulate themselves.

Hint 9

A school of thought developed by writings of Adam Smith, David Rocardo, & Thomas Malthus used to regulate government economies of the time.

Front 10

What is Productive Capacity?

Back 10

The maximum output that an economy can produce without big increases in inflation

Hint 10

Also called "Full-Employment Output"; Keynes felt the Great Depression continued due to lack of economic incentives to spend money & increase production.

Front 11

What is Demand-Side Economics?

Back 11

The idea that government spending and tax cuts help an economy by raising demand

Hint 11

Keynes felt that only the government had the capital to stimulate the economy through spending on goods & services evoking a cycle of production ending the Depression.

Front 12

What is Keynesian Economics?

Back 12

A form of demand-side economics that encourages government action to increase or decrease demand and output.

Hint 12

The idea that our economy is composed of three sectors -individual, business, & government- and that government actions can make up for changes in the other two.

Front 13

What is the Multiplier Effect?

Back 13

The idea that every one dollar of government spending creates more than one dollar in economic activity.

Hint 13

Ex. Gov. can prevent a recession by additional spending in the upcoming budget to stimulate economy.

Front 14

What is an Automatic Stabilizer?

Back 14

A government program that changes automatically depending on GDP and a person's income.

Hint 14

Ex. Taxes and Transfer Payments which produce economic stability by stimulating GDP & personal incomes.

Front 15

What is Supply-Side Economics?

Back 15

A school of economics that believes tax cuts can help an economy by raising supply.

Hint 15

Taxes have strong negative influence on economic output & by increasing aggregate supply we increase economic growth.

Front 16

What is the Council of Economic Advisors? (CEA)

Back 16

A group of three respected economists that advise the President on economic policy.

Hint 16

Under Kennedy Admin. Walter Heller, financial advisor to Pres. Kennedy suggested that tax cuts would stimulate demand & bring the economy closer to full productive capacity. Consumption & GDP grew by 4% over the next 2 yrs.

Front 17

What s a Balanced Budget?

Back 17

A budget in which revenues are equal in spending.

Hint 17

A budget where there is the same amount of money going into and coming out of the treasury.

Front 18

What is a Budget Surplus?

Back 18

A situation in which the government spends more than it takes in.

Hint 18

Occurs in years when revenues exceed expenditures

Front 19

What is Hyperinflation?

Back 19

Very high inflation

Hint 19

Caused by printing more money to cover large deficits in budget.

Front 20

What is a Treasury Bill?

Back 20

A government bond that is repaid within three months to a year.

Hint 20

a form of government borrowing to cover projects
costs; shortest repayment time.

Front 21

What is a Treasury Note?

Back 21

A government bond that is repaid within two to ten years.

Hint 21

gov. borrowing w/ medium range repayment time

Front 22

What is a Treasury Bond?

Back 22

A government bond that can be issued for as long as 30 years.

Hint 22

Gov. borrowing w/ long range repayment time

Front 23

What is the National Debt?

Back 23

All the money the federal government owes to bondholders.

Hint 23

Debt owned by investors in the U.S.A. and around the world who have put their money and trust in the federal gov.

Front 24

What is the Crowding-Out Effect?

Back 24

The loss of funds for private investment due to government borrowing.

Hint 24

When federal borrowing "crowds out" private borrowing by making it harder for private businesses to borrow.

Front 25

What is "Servicing the Debt"

Back 25

Paying the interest on the debt which is ever increasing & those dollars cannot be spent on defense, health care, or infrastructure.

Hint 25

High interest payments allocate money that could be better spent on government programs.

Front 26

What is the Budget Enforcement Act of 1990?

Back 26

A "Pay-As-You-Go" system that requires Congress to raise enough revenue to cover increases in direct spending so the budget deficit can't grow larger.

Hint 26

Suggestions have been made to amend the Constitution to require a balanced budget. It failed by 1 vote in 1995.

Front 27

What are two problems with the National Debt?

Back 27

1. It reduces the funds available for businesses to invest 2. The government must pay interest to bondholders = high interest

Hint 27

High National Debt can hurt investment and slows economic growth over the long run. The flip side is that more investment in private sector can lead to lower prices, more jobs, & overall higher standard of living for citizens.