Chapter 10 - Fiscal Policy

Medicare

________ provides health care to all individuals once they reach the age of 65.

Medicaid

________ provides health care to the poor, in conjunction with the states.

Social Security

________ provides retirement payments to retirees as well as a host of other benefits to widows and families of disabled workers.

Customs duties

________ are taxes levied on goods imported to the United States, such as foreign cars or wines.

Laffer curve

________: A relationship between the tax rates and tax revenues that illustrates that high tax rates could lead to lower tax revenues if economic activity is severely discouraged.

Lags

________ arise because decision- makers are often slow to recognize and respond to changes in the economy, and fiscal policies and other stabilization policies take time to operate.

Entitlement

________ and mandatory spending constitutes all spending that Congress has authorized by prior law.

Fiscal policy

________: changes in taxes and spending that affect the level of GDP.

Automatic stabilizers

________: Taxes and transfer payments that stabilize GDP without requiring policymakers to take explicit action.

Net interest

________ is the interest the government pays on the government debt held by the public.

broad components

Federal spending, spending by the U.S. government, consists of two ________:

federal budget

The ________ is the document that describes what the federal government spends and how it pays for that spending.

Permanent Income

________: An estimate of a household's long- run average level of income.

multiplier effect

The ________ occurs because an initial change in output will affect the income of households and thus change consumer spending.

expansionary policies

Government policies that increase aggregate demand are called _____________ such as increasing government spending and cutting taxes.

contractionary policies

Government policies that decrease aggregate demand are called ______________ such as decreasing government spending and increasing taxes.