Major Test #1 debt
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50 Terms
fiscal policy
: government decisions about taxing and spending to influence the economy. It’s how the government manages money to promote economic growth, control inflation, or reduce unemployment
federal budget
the government’s annual plan for how much money it will collect (through taxes) and how it will spend that money on programs, defense, infastructure, etc.
fiscal year
the 12 month period used for budgeting and accounting. the u.s. federal fiscal year runs from October 1 to September 30
deficit spending
when the government spends more money than it collects in taxes, requiring it to borrow money to cover the difference
budget surplus
when the government collects more money in taxes than it spends - opposite of a deficit
balanced budget
a budget where government revenues (income) equal government spending, resulting in neither a surplus nor a deficit
balanced budget amendment
a proposed constitutional amendment that would require the federal government to balance its budget each year (spend only what it collects in taxes)
national deficit
the difference between what the federal government spends and what in collects in a single year. if spending exceeds revenue, there’s a deficit
national debt
the total amount of money the federal government owes, accumulated from years of deficit spending. It’s the sum of all past deficits
debt-to-gdp ratio
a measure comparing the national debt to the total economic output (GDP). it shows the debt as a percentage of the economy’s size- used to assess if debt is sustainable
interest on the debt
the money the government must pay to creditors (those loaned it money) as interest on the national debt. this is a growing budget expense
generational debt
the idea that current deficit spending creates financial obligations that future generations will have to pay through taxes or reduces services
creditors
people, companies, or countries that have loaned money to the federal government (by buying Treasury securities
tax revenue
money collected by the gov through taxes on income, sales, property, etc
progressive tax
a tax system where people with higher incomes pay a higher percentage in taxes. Example: federal income tax (wealthier people pay higher rates.)
regressive tax
a tax that takes a larger percentage from lower-income people than from higher-income people. Example: sales tax (everyone pays the same rate, but it’s a bigger burden for poorer people)