Macroeconomics Ch. 14

Front 1

demand-side policies

Back 1

monetary and fiscal; works by shifting the AD curve

Front 2

supply-side policies

Back 2

works by shifting the LAS curve

Front 3

assumptions of fiscal model

Back 3

1. financing the deficit doesn't have any offsetting effect (i.e. crowding out)
2. gov't knows what the situation is i.e. mpe
3. gov't knows the economy's potential income level
4. gov't has flexibility in changing spending and tax
5. size of the gov't debt doesn't matter
6. fiscal policy doesn't negatively affect other gov't goals

Front 4

crowding out

Back 4

the offsetting of a change in govt expenditures by a change in private expenditures in the opposite direction

Front 5

Okun's rule of thumb

Back 5

a 1% fall in the unemployment rate is associated with a 2% increase in income

Front 6

automatic stabilizer

Back 6

a built-in fiscal policy; which is any govt program or policy that will counteract the business cycle without any new govt action
(i.e. welfare payments, unemployment insurance, income tax system)

Front 7

automatic destabilizer

Back 7

institutional structures that offsets automatic stabilizers
(i.e. state's constitutional provisions to maintain balanced budgets)

Front 8

procyclical fiscal policy

Back 8

changes in govt psending and taxes that increase the cyclical fluctuations in the economy instead of reducing them
(i.e. budget cut and tax increases during recession or budget increase and tax decreased during expansionary)

Front 9

Alternatives and supplments to monetary and fiscal policy

Back 9

(1) directed investment policies
- rosy scenario policy
- financial guarantees
(2) autonomous consumption policy
(3) trade policy & export-led growth
- export-led growth policies
- exchange rate policies

Front 10

rosy scenario policy

Back 10

govt policy of making optimisitc predictions and nevermaking gloomy predictions

Front 11

autonomous consumption policy

Back 11

increase individual's credit -> increase AD

Front 12

trade policy & export-led growth

Back 12

increase autonomous export or decrease autonomous import

Front 13

export-led growth policies

Back 13

policies designed to stimulate U.S. exports and increase aggregate expenditures on U.S. goods,and hence to have a multiplied efect on U.S. income

Front 14

exchange rate policy

Back 14

a policy of deliberatedly affecting a country's exchange rate in order to affect its trade balance

Front 15

rational expectation

Back 15

forward-looking expectations that use available information

Front 16

policy regime

Back 16

a predetermined statement of the policy that will be followed in various circumstances

Front 17

policy

Back 17

a one-time reaction to a problem; it is chosen w/out a predetermined framework