Unit 8A: Fiscal Policy

Flashcards covering key vocabulary and concepts from Unit 8A on Fiscal Policy in 8th Grade Economics.

Fiscal Policy

The means by which a government adjusts its levels of spending or taxes to influence a nation's economy.

Discretionary Fiscal Policy

The result of deliberate actions by policymakers resulting in a change to government spending or taxes.

Automatic Stabilizers

A type of fiscal policy that occurs naturally with the business cycle without requiring new legislation.

Expansionary Fiscal Policy

Used to increase aggregate demand, typically during a recession, through government purchases, tax reductions, or increased transfers.

Contractionary Fiscal Policy

Used to decrease aggregate demand during inflation through reduced government purchases, increased taxes, or reduced transfers.

Stabilization Policy

Government policy designed to reduce the severity of recessions and control sharply rising economic expansion.

Business Cycle

The fluctuating pattern of economic activity characterized by phases of peak, recession, trough, and expansion.

Recognition Lag

The time it takes for the government to recognize that a recessionary or inflationary gap exists.

Administrative Lag

The time it takes for the government to develop a spending or tax plan, which is then debated and passed.

Operational Lag

The time it takes for fiscal policy to affect employment, price level, and output.