is increasing government spending and /or decreasing tax collections in order to stimulate the macroeconomy.
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Marginal Propensity to Save (MPS)
given an extra dollar, how much of it is saved.
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3
Automatic Stabilizers
are government policies already in place that promote deficit spending during recessions and surplus budgets during expansions.
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4
Contractionary Fiscal Policy
is the appropriate method to remedy inflation.
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Government spending
leads to extra income for firms.
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GDP
The shortfall of real ________ from its full employment potential is known as the recessionary gap, which is shown in panel A from Y1 to Yp.
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aggregate demand
Crowding out is reflected in a(n) ________ curve that shifts back to the left after a fiscal policy has just shifted to the right.
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Fiscal policy
is changing the level of government spending or tax revenues to achieve economic stability.
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appropriate fiscal policy
Higher taxes are the ________ to fight inflation.
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Inflationary gap
the surefit of real GDP over its full- employment potential.
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The federal government
increases spending or reduced tax collections, which increases aggregate demand.
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12
Treasury Security
a financial instrument that allows the federal government to borrow funds.
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Treasury Bond
a loan which has the duration of 6- 30 years.
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Federal Surplus
occurs when tax revenues exceed government spending.
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Treasury Bill
a loan which has the duration of a year or less.
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Federal Deficit
occurs when government spending exceeds tax revenues.
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Treasury Note
a loan which has the duration of 1- 5 years.
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Marginal Propensity to Consume (MPC)
given an extra dollar, how much of it will be spent.
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Contractionary fiscal policy
is decreasing government spending and /or increasing tax collections in order to cool off the economy and lower the price level.
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aggregate demand
A decrease in government spending of any amount, matched by a tax decrease, creates a decrease in ________ of that amount.
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expansionary fiscal policy
The decrease in investment spending by businesses can offset the governments ________.
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federal government
The ________ runs a surplus when tax revenues exceed government expenditures.
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government spending
Cuts in ________ are the appropriate fiscal policy to fight inflation.
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Aggregate demand
In the Long- run adjustment to a recessionary gap, the ________ and Aggregate supply curves convey an economy where the market is producing below its potential.
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25
Fiscal policy
is changing the level of government spending or tax revenues to achieve economic stability
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26
Expansionary Fiscal Policy
is increasing government spending and/or decreasing tax collections in order to stimulate the macroeconomy
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Deficit Spending
when federal government expenditures exceed tax revenues
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28
Contractionary fiscal policy
is decreasing government spending and/or increasing tax collections in order to cool off the economy and lower the price level
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29
Inflationary gap
the surefit of real GDP over its full-employment potential
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30
Crowding out
is the increase in interest rates and subsequent decline in spending that occur when government borrows money to finance a deficit
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Marginal Propensity to Consume (MPC)
given an extra dollar, how much of it will be spent
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32
Marginal Propensity to Save (MPS)
given an extra dollar, how much of it is saved
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33
Balanced budget move
when a governments budget remains balanced with spending and tax collections, if spending increases, taxes increase as well
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34
Automatic Stabilizers
are government policies already in place that promote deficit spending during recessions and surplus budgets during expansions
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35
Federal Surplus
occurs when tax revenues exceed government spending
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36
Federal Deficit
occurs when government spending exceeds tax revenues
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37
Federal Debt
When national government spending exceeds tax revenues
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38
Treasury Security
a financial instrument that allows the federal government to borrow funds
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