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What is fiscal policy?
Federal government’s use of taxing and spending to keep economy stable
What is Keynesian Economics?
Economy composed of 3 sectors: individuals, businesses, government (government actions can make up for changes in other 2)
KEYNES BELIEVED FISCAL POLICY USED TO FIGHT BOTH RECESSION OR DEPRESSION AND INFLATION
What is the role of the government in Demand-Side Policy?
Government is only large enough to enact policy to offset lack of spending in other sectors
Spending increase creates budget deficits gov. needs to borrow to make a difference
What are supply side policies?
Stimulate economy by removing government regulations and lowering marginal tax rates to increase production
What are ex.’s of supply side policies?
Stimulate production to spur output
Increase investment and productivity lead to increased output
Businesses invest/expand - creates jobs; people work, save, spend more
What are ex’s of demand side policies?
Stimulate consumption to spur output
People have more $ = more consumption
Businesses increase output to meet growing demand
What is money?
Anything generally accepted in payment for goods/services
What is commodity money and what are ex.’s?
Something that performs function of money but has alternative uses
Ex: Gold, silver, cigarettes
What is fiat money and what are ex.’s?
Something that serves as money but has no other important uses
Ex: Paper Money, Coins
What is the formula for future value of $?
Fv = PV X (1+r)²
What is the formula for present value of $?
Pv = Fv/(1+r)^n
