Fiscal Policy Flashcards

Flashcards about Fiscal Policy

What is Fiscal Policy?

Actions by Congress to stabilize the economy.

What is Monetary Policy?

Actions by the Federal Reserve Bank to stabilize the economy.

What is Expansionary Fiscal Policy?

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap). Examples include: Increase Government Spending, Decrease Taxes (Increasing disposable income), or combinations of the two.

What is Contractionary Fiscal Policy?

Laws that reduce inflation and decrease GDP (Close an Inflationary Gap). Examples include: Decrease Government Spending, Increase Taxes (Decreasing disposable income), or combinations of the Two.

What is a Budget Deficit?

When annual government spending and transfer payments are greater than tax revenue.

What is a Budget Surplus?

When annual government spending and transfer payments are less than tax revenue.

What is the National Debt?

The accumulation of all the budget deficits over time.

What are Entitlements?

A Federal program that requires payments to any eligible person or unit of government. This mandatory spending must be paid (e.g. Social Security)

What is the Recognition Lag in Fiscal Policy?

Congress must react to economic indicators before it’s too late.

What is the Administrative Lag in Fiscal Policy?

Congress takes time to pass legislation.

What is the Operational Lag in Fiscal Policy?

Spending/planning takes time to organize and execute (changing taxing is quicker).

What are Supply-side Fiscal Policies?

Government policies designed to increase production by reducing business taxes and/or regulations.

What do Education/training spending , Infrastructure spending and Production/Investment incentive programs increase?

Increases human capital and physical capital