Macr - Ch.13

Government Transfers

Payments by the government to households for which no good or service is provided in return.

Social Insurance

Government programs intended to protect families against economic hardship.

Fiscal Policy

The use of taxes, government transfers, or government purchases to shift the aggregate demand curve.

Expansionary Fiscal Policy

Policy that increases aggregate demand to close a recessionary gap.

Contractionary Fiscal Policy

Policy that decreases aggregate demand to close an inflationary gap.

Multiplier

The ratio of the total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change.

Automatic Stabilizers

Spending and taxation rules that cause fiscal policy to be automatically expansionary during contractions and contractionary during expansions.

Discretionary Fiscal Policy

Fiscal policy resulting from deliberate actions by policymakers rather than rules.

Budget Balance

The difference between government tax revenue and its spending on goods, services, and transfers.

Cyclically Adjusted Budget Balance

An estimate of the budget balance if the economy were at potential output.

Public Debt

Government debt held by individuals and institutions outside the government.

Debt–GDP Ratio

A measure used to assess a government's ability to pay its debt relative to the size of its economy.

Implicit Liabilities

Spending promises made by governments that are effectively a debt but not included in usual debt statistics

Multiplier

1(1−MPC)

Total Effect of Change in Government Purchases (ΔG): ΔY

ΔG×1(1−MPC)

Total Effect of Change in Transfers (ΔTR) or Taxes (ΔT): ΔY

ΔTR×MPC×1(1−MPC)

Budget Balance (SGovernment): SGovernment​

T−G−TR