Chapter 13 – Fiscal Policy, Deficits, and Debt

A collection of vocabulary flashcards covering key concepts related to fiscal policy, deficits, and debt.

Fiscal Policy

Deliberate changes in government spending and taxes designed to achieve full-employment, control inflation, and encourage economic growth.

Expansionary Fiscal Policy

A policy used during a recession that involves increasing government spending and/or decreasing taxes to stimulate the economy.

Contractionary Fiscal Policy

A policy used during demand-pull inflation that involves decreasing government spending and/or increasing taxes to cool down the economy.

Discretionary Fiscal Policy

Changes in fiscal policy that are at the option of the Federal government.

Automatic Stabilizers

Features of the fiscal system that automatically adjust government spending and taxes in response to changes in economic activity, reducing the severity of business fluctuations.

Marginal Tax

The change in taxes divided by the change in GDP.

Average Tax

The total taxes paid divided by GDP.

Cyclical Adjustment

Evaluating the fiscal policy by measuring the deficit or surplus using existing taxes and government spending when the economy is at full employment.

Public Debt

Accumulation of federal deficits and surpluses, representing the total amount of money that the government owes.

Interest Charges on Debt

The costs incurred by the government to pay interest on its outstanding public debt; represented as a percentage of the GDP.

Social Security Shortfall

Projected depletion of funds intended for income during retirement by the year 2033 due to increasing beneficiaries.

Medicare Shortfall

Projected depletion of funds intended for medical care during retirement by the year 2024 due to an increasing number of beneficiaries.