Principles of Macroeconomics-11th Edition CASE/FAIR/OSTER Chapter 9 – Flashcards
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automatic destabilizer
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revenue and expenditure items in the federal budget that automatically change with the state of the economy in such a way as to destabilize GDP
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automatic stabilizers
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revenue and expenditure items in the federal budget that automatically change with the state of the economy in such a way as to stabilize GDP
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balanced- budget multiplier
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the ratio of change in the equilibrium level of output to a change in government spending where the change in government spending is balenced by a change in taxes so as not to create any deficit. The balanced-budget multiplier is equal to 1: the change in Y resulting from the change in G and the equal change in T are exactly the same size as the initial changes in G or T.
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budget deficit
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the difference between what a government spends and what it collects in taxes in a given period; G-T
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cyclical deficit
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the deficit that occurs because of a downturn in the business cycle
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discretionary fiscal policy
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changes in taxes or spending that are the result of deliberate changes in government policy
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disposable, or after tax income (Y)
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total income minus taxes; Y-T
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federal budget
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the budget of the federal government
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federal debt
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the total amount owed by the federal government
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federal surplus (+)
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federal government receipts minus expenditures (+)
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federal deficit (-)
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federal government receipts minus expenditures (-)
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fiscal drag
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the negative effect on the economy that occurs when average tax rates increase because taxpayers have moved into higher income brackets during an expansion
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fiscal policy
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the government's spending and taxing policies
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full-employment budget
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what the federal budget would be if the economy were producing at the full-employment level of output
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government spending multiplier
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the ratio of the change in the equilibrium level of output to a change in government spending
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monetary policy
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the behavior of the Federal Reserve concerning the nation's money supply
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net taxes (T)
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taxes made by firms and households to the government minus transfer payments made to the households by the government
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privately held federal debt
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the privately held (non-government owned) debt of the U.S government
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structural deficit
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the full deficit that remains at full employment
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tax multiplier
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the ratio of change in the equilibrium level of output to a change in taxes
