Macroeconomics Chapter 5.1

Front 1

transfer payment

Back 1

the provision of aid or money to an individual who is not required to provide anything in exchange for the payment.
i.e- Social Security and welfare benefits

Front 2

as economy rises, ___ people qualify for welfare and employment benefits (transfer payments). as economic activities fall, ____ people qualify for welfare and employment benefits.

Back 2

fewer, more

Front 3

budget surplus

Back 3

occurs if government revenues exceed expenditures

Front 4

budget deficit

Back 4

occurs if government expenditures exceed revenues. The minus sign is often omitted when reporting a deficit

Front 5

balanced budget

Back 5

budget surplus equals zero

Front 6

national debt

Back 6

sum of all past federal deficits, minus any surpluses

Front 7

Fiscal policy

Back 7

the use of government expenditures and taxes to influence the level of economic activity

Front 8

automatic stabilizer

Back 8

Any government program that tends to reduce fluctuations in GDP automatically

Front 9

expansionary policy

Back 9

used to try to combat unemployment in a recession by lowering interest rates in the hope that easy credit will entice businesses into expanding. Increase government spending and lower tax

Front 10

Contractionary policy

Back 10

to slow inflation in order to avoid the resulting distortions and deterioration of asset values. a cut in government purchases or transfer payments, or an increase in taxes. Decrease government spending, increase taxes

Front 11

recognition lag

Back 11

It takes some time for policy makers to realize that a recessionary or an inflationary gap exists

Front 12

implementation lag

Back 12

The time that elapses before a fiscal policy, such as a change in government purchases or a change in taxes, is agreed to and put into effect

Front 13

impact lag

Back 13

the time that goes by before the policy has its full effect on aggregate demand

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crowding out

Back 14

The tendency for an expansionary fiscal policy to reduce other components of aggregate demand

i.e- increase in G, government borrows funds thus increases interest rates, thus decreasing investments, thus offsetting some of the effects of increase in G

Front 15

crowding in

Back 15

The tendency for an contractionary fiscal policy to increase other components of aggregate demand

Front 16

Supply-side economics

Back 16

the school of thought that promotes the use of fiscal policy to stimulate long-run aggregate supply

Front 17

Discretionary fiscal policy

Back 17

those relatively rare instances in which Congress passes legislation to increase G or cut T to stimulate the economy to fight recession (or the opposite to deal with inflation)

Front 18

net investment

Back 18

total spending on new fixed investment - replacement investment. an activity of spending which increases the availability of fixed capital goods or means of production