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6 Cards in this Set
- Front
- Back
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Fiscal policy
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Changes in government purchases and/or tax collections designed to achieve a full employment and non inflationary domestic output
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Expansionary fiscal policy
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INCREASE AD by increase in government purchases or decrease in taxes
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Contractionary Fiscal policy
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DECREASE AD by decrease in government purchases or increase in taxes
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GDP gap
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Difference between National Rate of Output and SR equilibrium
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Automatic Stabilizer
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Changes in fiscal policy that stimulate AD when the economy goes into a recession (or slow AD when economy goes into boom) without policy makers having to take deliberate action
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Timing problems
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1. Operational lag - takes time for stimulus to actually happen
2. Administrative lag - takes time to pass an economic package 3. Recognition lag - takes time to confirm how economy is doing OAR |
