Chapter 23: Fiscal Policy and the Federal Budget

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11 Terms

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Crowding out occurs when
government borrowing pushes up interest rates, which causes a reduction in private consumption and investment.
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recognition lag
The time delay between an actual change in economic activity and the ability for policymakers and others to discern the change
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Fiscal policy
________ is the use of government spending and taxation to influence the economy.
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Non discretionary government spending
________ is determined by current obligations, policies, and demographics, rather than by policymaker discretion.
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budget deficit
A(n) ________ occurs when the amount of government spending in a given period is larger than the amount of government revenue from taxes and earnings during that period.
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budget surplus
A(n) ________ occurs when the amount of government spending in a given period is less than the amount of government revenue from taxes and earnings during that period.
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Contractionary fiscal policy
________ is used to decrease aggregate demand.
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Discretionary spending items
________ include spending on national defense, transportation, and education.
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The debt-to-GDP ratio measures
the size of a country's debt as a percentage of the country's gross domestic product.
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Corporate income tax revenues come from
similar taxes imposed on U.S. corporations, although corporate tax bracket values differ from individual tax brackets.
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administration lag
The time it takes for Congress and the president to agree on what fiscal policy to use