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27 Cards in this Set

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What is Fiscal Policy?
The use of government spending & revenue collection to influence the economy
F_____ P____ decisions include how much to spend & how much to tax decided yearly.
What is the Federal Budget?
A plan for the federal government's revenues and spending for the coming year.
written document indicating the amount of money the gov. expects to receive for a certain year & amount gov. can spend for that year
What is a Fiscal Year?
A twelve-month period that can begin on any date.
The F____ Y____ runs from October 1st through September 30th
What is the Office of Management and Budget (OMB)?
Government office that manages the federal budget.
Part of the Executive Office of the President
What is the Congressional Budget Office (CBO)?
Government agency that provides economic data to Congress.
Created in 1974 to give Congress independent economic data to help with its decisions.
What is an Appropriations Bill?
A bill that sets money aside for specific spending.
submitted by Appropriations Committees to each house of Congress authorizing specific spending to be submitted to President.
What are Expansionary Policies?
Fiscal policies, like higher
spending and tax cuts, that encourage economic growth
Used to increase economic output of nation
What are Contractionary Policies?
Fiscal policies, like lower spending, and higher taxes tha reduce economic growth.
Used to decrease economic output of nation
What is Classical Economics?
The idea that free markets can regulate themselves.
A school of thought developed by writings of Adam Smith, David Rocardo, & Thomas Malthus used to regulate government economies of the time.
What is Productive Capacity?
The maximum output that an economy can produce without big increases in inflation
Also called "Full-Employment Output"; Keynes felt the Great Depression continued due to lack of economic incentives to spend money & increase production.
What is Demand-Side Economics?
The idea that government spending and tax cuts help an economy by raising demand
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.
What is Keynesian Economics?
A form of demand-side economics that encourages government action to increase or decrease demand and output.
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.
What is the Multiplier Effect?
The idea that every one dollar of government spending creates more than one dollar in economic activity.
Ex. Gov. can prevent a recession by additional spending in the upcoming budget to stimulate economy.
What is an Automatic Stabilizer?
A government program that changes automatically depending on GDP and a person's income.
Ex. Taxes and Transfer Payments which produce economic stability by stimulating GDP & personal incomes.
What is Supply-Side Economics?
A school of economics that believes tax cuts can help an economy by raising supply.
Taxes have strong negative influence on economic output & by increasing aggregate supply we increase economic growth.
What is the Council of Economic Advisors? (CEA)
A group of three respected economists that advise the President on economic policy.
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.
What s a Balanced Budget?
A budget in which revenues are equal in spending.
A budget where there is the same amount of money going into and coming out of the treasury.
What is a Budget Surplus?
A situation in which the government spends more than it takes in.
Occurs in years when revenues exceed expenditures
What is Hyperinflation?
Very high inflation
Caused by printing more money to cover large deficits in budget.
What is a Treasury Bill?
A government bond that is repaid within three months to a year.
a form of government borrowing to cover projects
costs; shortest repayment time.
What is a Treasury Note?
A government bond that is repaid within two to ten years.
gov. borrowing w/ medium range repayment time
What is a Treasury Bond?
A government bond that can be issued for as long as 30 years.
Gov. borrowing w/ long range repayment time
What is the National Debt?
All the money the federal government owes to bondholders.
Debt owned by investors in the U.S.A. and around the world who have put their money and trust in the federal gov.
What is the Crowding-Out Effect?
The loss of funds for private investment due to government borrowing.
When federal borrowing "crowds out" private borrowing by making it harder for private businesses to borrow.
What is "Servicing the Debt"
Paying the interest on the debt which is ever increasing & those dollars cannot be spent on defense, health care, or infrastructure.
High interest payments allocate money that could be better spent on government programs.
What is the Budget Enforcement Act of 1990?
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.
Suggestions have been made to amend the Constitution to require a balanced budget. It failed by 1 vote in 1995.
What are two problems with the National Debt?
1. It reduces the funds available for businesses to invest 2. The government must pay interest to bondholders = high interest
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.