Us Fiscal And Monetary Policy

Front 1

Fiscal Policy

Back 1

The means by which the government sets its spending levels and tax rates to influence the economy's behavior.

Front 2

Discretionary Fiscal Policy

Back 2

The actions the government takes on an ad hoc basis to change taxes or spending.

Front 3

Automatic Stabilizers

Back 3

Predetermined policies designed to offset fluctuations in the business cycle.

Front 4

Multiplier Effect

Back 4

A series of increases in consumer spending that results from an initial increase in government purchases.

Front 5

Marginal Propensity to Consume (MPC)

Back 5

The fraction of extra income that a consumer spends.

Front 6

Government Purchases Multiplier

Back 6

When you multiply this number by the initial increase in governement purchases, you get the total impact on real GDP.

1/(1-MPC)

Front 7

Tax Multiplier

Back 7

When you multiply this number by the initial increase in taxes, you get the total impact on real GDP.

(-MPC)/(1-MPC)

Front 8

Budget Surplus

Back 8

When tax revenues exceed government expenditures.

Front 9

Budget Deficit

Back 9

When government expenditures exceed tax revenues.

Front 10

Crowding Out

Back 10

When government borrowing causes a decrease in private investment.

Front 11

Loanable Funds

Back 11

The sum of money that people or businesses decide to save, which then becomes available to be loaned.

Front 12

Central Bank

Back 12

A national bank that governs a nation's banking system.

Front 13

Federal Reserved (FED)

Back 13

The central bank of the US

Front 14

Required reserve ratio (RRR)

Back 14

The minimum fraction of deposits that commercial banks are required by law to keep in reserves.

Front 15

Money

Back 15

Any asset that people are generally willing to accept in exchange for goods and services or for payment or debts.

Front 16

Money Supply

Back 16

The quantity of money available in the economy.

Front 17

Money multiplier (MM)

Back 17

the amount of money that banks generate with each dollar of reserves.

MM=1/RRR

Front 18

Money Market

Back 18

The collection of buyers and sellers of money.

Front 19

Money Market Equilibrium

Back 19

The state where the quantity of money demanded equals the quantity of money supplied, resulting in the equilibrium interest rate.

Front 20

Monetary Policy

Back 20

The actions the central bank takes to manage the money supply and interest rates in order to achieve macroeconomic policy goals.

Front 21

Expansionary Monetary Policy

Back 21

When a central bank uses its tools to increase the money supply, lower interest rates, and increase aggregate demand.

Front 22

Contractionary Monetary Policy

Back 22

Decreases the money supply, raises interest rates, and decreases aggregate demand.

Front 23

Discount Rate

Back 23

The interest rate on Fed's loans to commercial banks.

Front 24

Open Market Operations

Back 24

The buying and selling of government bonds.

Front 25

Quantity Theory of Money

Back 25

Says that money supply has a direct and proportional relationship with the inflation rate.