Chapter 30: Fiscal Policy, Deficits, and Debt

Deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth

A group of three economists appointed by the president to provide expertise and assistance on economic matters

Used to stimulate the economy during a recession

Government spending in excess of tax revenues

________ (or "negative taxes) "behave in the opposite way from tax revenues.

Used to control demand-pull inflation

Tax revenues in excess of government spending

Anything that increases the government’s budget deficit (or reduces its budget surplus) during a recession and increases its budget surplus (or reduces its budget deficit) during an expansion without requiring explicit action by policymakers

The average tax rate rises with GDP

The average tax rate remains constant as GDP rises

The average tax rate falls as GDP rises

A wealthy, highly productive nation can incur and carry a(n) ________ more easily than a poor nation can.

Deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth

A group of three economists appointed by the president to provide expertise and assistance on economic matters

Used to stimulate the economy during a recession

Government spending in excess of tax revenues

Used to control demand-pull inflation

Tax revenues in excess of government spending

Anything that increases the governments budget deficit (or reduces its budget surplus) during a recession and increases its budget surplus (or reduces its budget deficit) during an expansion without requiring explicit action by policymakers

The average tax rate rises with GDP

The average tax rate remains constant as GDP rises

The average tax rate falls as GDP rises

Full employment budget; used to adjust actual Federal budget deficits and surpluses to account for the changes in tax revenues that happen automatically whenever GDP changes

A by-product of the economys slide into recession

Time between the beginning of recession or inflation and the certain awareness that it is actually happening

Significant lag between the time the need for fiscal action is recognized and the time action is taken

Lag between the time fiscal action is taken and the time that action affects output, employment, or the price level

Politicians stimulating the economy before their re-election and then using contractionary fiscal policy to dampen the excessive aggregate demand that they caused with their pre-election stimulus

An expansionary fiscal policy (deficit spending) may increase the interest rate and reduce investment spending, thereby weakening or canceling the stimulus of the expansionary policy

Total accumulation of the deficits (minus the surpluses) the Federal government has incurred through time

Financial instruments issued by the Federal government to borrow money to finance expenditures that exceed tax revenues

In return for the benefits derived from the borrowed funds, the United States transfers goods and services to foreign lenders

Part of the government spending enabled by the public debt is for public investment outlays (for example, highways, mass transit systems, and electric power facilities) and "human capital" (for example, investments in education, job training, and health)

Full employment budget; used to adjust actual Federal budget deficits and surpluses to account for the changes in tax revenues that happen automatically whenever GDP changes

A by-product of the economy’s slide into recession

Politicians stimulating the economy before their re-election and then using contractionary fiscal policy to dampen the excessive aggregate demand that they caused with their pre-election stimulus

An expansionary fiscal policy (deficit spending) may increase the interest rate and reduce investment spending, thereby weakening or canceling the stimulus of the expansionary policy

Total accumulation of the deficits (minus the surpluses) the Federal government has incurred through time

Financial instruments issued by the Federal government to borrow money to finance expenditures that exceed tax revenues

In return for the benefits derived from the borrowed funds, the United States transfers goods and services to foreign lenders

Part of the government spending enabled by the public debt is for public investment outlays (for example, highways, mass transit systems, and electric power facilities) and “human capital” (for example, investments in education, job training, and health)