Discretionary Fiscal Policy

What is one function of the government?

Stabilize the economy

What did john maynard keynes do?

Used government spending and taxation to manage the business cycle

What is the public budget?

A plan for government spending and revenue collection over a specific period

What can be achieved by manipulating the public budget?

Stability

What stands for government spending?

G

What stands for taxation?

T

What is the employment act of 1946

A congressional mandate for stabilization policy

What did the employment act of 1946 do?

Defined governments role in stabilization and created the council of economic advisors to the president

What does discretionary mean?

You make the decision

What does nondiscretionary mean?

No decisions can be made

What is discretionary fiscal policy?

The deliberate manipulation of G &T in attempt to alter real GDP to control inflation and stimulate economic growth

What does contractionary fiscal policy do?

Creates a surplus in federal budget to combat inflation by decreasing G and increasing T

What does expansionary fiscal policy do?

Creates a federal budget deficit to combat a recession by increasing G and decreasing T