Ch.13 AP Macroeconomics (Fiscal Policy, Deficits, and Debt) – Flashcards
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A board of three professional economists that was established in 1946 to advise the president on economic policy. Publishes the Annual Economic Report of the President
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Council of Economic Advisers
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Changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
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Fiscal Policy
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An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output in times of recession.
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expansionary fiscal policy
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Shortfall that occurs when expenses are higher than revenue over a given period of time.
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budget deficit
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Fiscal policy used to decrease aggregate demand or supply. Deliberate measures to decrease government expenditures, increase taxes, or both. Appropriate during periods of inflation.
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contractionary fiscal policy
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A mechanism that increases government's budget deficit (or reduces its surplus) during a recession and increases government's budget surplus (or reduces its deficit) during inflation without any action by policymakers. The tax system is one such mechanism. Ex) Government spending is a ________ __ ________.
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built in stabilizer
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A taxation system that taxes higher incomes at a higher percentage rate than lower incomes; it is designed to reduce income inequalities and finance social spending
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progressive tax system
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A tax whose average tax rate remains constant as the tax payer's income increases or decreases.
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proportional tax system
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a tax whose average tax rate decreases as the taxpayer's income increases and increases as the tax payer's income decreases
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regressive tax system
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A comparison of the government expenditures and tax collections that would occur if the economy operated at full employment throughout the year, the full employment budget. Figured out by CEA.
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standardized budget
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A federal budget deficit that is caused by a recession and the consequent decline in tax revenues Ex) When the economy is in a recession and the government doesn't get as many taxes
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cyclical deficit
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Act that worked to boost the American economy. Money went to states to create jobs and went to large corporations to create jobs and keep people working. $152 billion just in 2008, Signed by Pres. Bush as economists gave a 50%chance of recession,
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Economic Stimulus Act of 2008
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Congressional agency of budget experts who assess the feasibility of the president's plan and who help create Congress's version of the federal budget.
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Congressional Budget Office
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All the surplus social contributions have been spent by the federal govt to pay for other govt expenses
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social security surplus
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The time required to gather information about the current state of the economy; months may elapse before national economic problems can be identified, a reason gov't response is diminished.
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recognition lag
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The time period after the need for a policy change is recognized but before the policy is actually implemented, a reason gov't response is diminished.
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administrative lag
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The time it takes for the full impact of a government program or tax change to have its effect on the economy, a reason gov't response is diminished.
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operational lag
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The fluctuations in output and employment resulting from the manipulation of the economy for electoral gain.
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political business cycles
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Monetary policies that tend to increase any economic trend. (may speed up an expansion of the economy, or increase the magnitude of a financial downturn)
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pro-cyclical
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This occurs when government spending is financed through borrowing from the private sector, which puts upward pressure on interest rates and stop private investors who cannot afford to borrow at the higher rates of interest.
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crowding out effect
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Government policy that attempts to manage the economy by controlling the money supply and thus interest rates. Most economists prefer this to fiscal policy.
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monetary policy
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All of the money borrowed by the government over the years and not yet repaid, plus the accumulated interest on that money
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Public debt
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Treasury bills, notes, and bonds used to finance budget deficits, the components of the public debt.
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securities
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Part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the IMF, only 25 % of US total.
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external public debt
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The gov't spendings on infrastructure, educations, and health care which increases PRODUCTIVITY,
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public investment
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The total supply of money in circulation, composed of currency, checking accounts, and traveler's checks.
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money supply
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The more ____________ a tax system is the more built in stability because the Tax line is steepest.
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Progressive
