Macroeconomics: Fiscal Policy and National Debt

A compilation of key terms and definitions related to macroeconomic principles, fiscal policy, and the national debt.

Fiscal Policy

The use of government spending and taxation to influence the economy.

Aggregate Demand

The total demand for all goods and services in an economy at a given overall price level and in a given time period.

Expansionary Fiscal Policy

Increases aggregate demand by increasing government spending, transfers, or decreasing taxes.

Contractionary Fiscal Policy

Decreases aggregate demand by decreasing government spending, transfers, or increasing taxes.

Multiplier Effect

The proportional amount that an increase in spending produces in the national income.

Deficit

Occurs when government expenditures exceed revenues.

Surplus

Occurs when government revenues exceed expenditures.

National Debt

The total amount of money that a country's government has borrowed.

Automatic Stabilizers

Economic policies and programs that automatically help stabilize the economy, such as unemployment benefits or tax revenues.

Positive Output Gap

When actual output exceeds potential output.

Negative Output Gap

When actual output is less than potential output.

Real GDP

The gross domestic product adjusted for inflation.

Public Debt

The total amount of money the government owes to creditors.

Treasury Bonds

Long-term government debt securities with a maturity of more than ten years.

Aggregate Supply

The total supply of goods and services that firms in an economy plan on selling during a specific time period.

Stagflation

A situation of stagnant economic growth accompanied by inflation.

Lags in Fiscal Policy

Delays in the effects of fiscal policy due to recognition, administrative, and operational delays.

MPC (Marginal Propensity to Consume)

The fraction of additional income that a household consumes rather than saves.

Tax Multiplier

The ratio of the change in GPD to the change in taxes.

Expenditure Multiplier

The ratio of the change in GDP to the change in investment or spending.

Balancing the Budget

A situation where revenues are equal to expenditures.

Debt Held by Foreign Countries

Debt that is owned by foreign investors or governments.

Crowding Out Effect

A situation where increased government spending leads to a reduction in private sector spending and investment.

Interest Payments on Debt

Payments made to debt holders as compensation for lending money.

Revenue to GDP Ratio

A measure of how much revenue a government collects compared to the size of its economy.

Deficit Financing

The practice of funding government spending by borrowing rather than by raising taxes.

Short-run Economic Equilibrium

The state where quantity demanded equals quantity supplied at a particular price.

Long-run Self-Adjustment

The process through which the economy returns to its potential output over time.

Social Welfare Programs

Government programs designed to improve citizens' quality of life.

Tax Brackets

Ranges of income taxed at a specific rate under the progressive tax system.

Federal Reserve System

The central banking system of the United States.

Debt Ceiling

The maximum amount of money that the government is allowed to borrow.

Bond Yield

The return an investor realizes on a bond.

Federal Budget

The government's estimate of revenue and spending for the coming fiscal year.

Nominal Interest Rates

The interest rates before adjustment for inflation.

Supply Shock

An unexpected event that causes the supply curve to shift.

Economic Growth

An increase in the production of goods and services in an economy.

Consumer Expectations

The beliefs of households about their future income, which can influence their spending and savings.

Inequality in Wealth Distribution

The unequal distribution of assets among residents of an area.

Fiscal Stimulus

Increases in government spending or tax cuts that aim to boost economic activity.

Interest Rate Spread

The difference between the interest rate on loans and the rate on deposits.

Inflationary Expectations

The anticipation of inflation among consumers and businesses.

Long-term economic policies

Government measures aimed at influencing long-term economic growth.

Economic Indicators

Statistics that provide insights into the economic performance.

Funding Gap

A shortfall when expenses exceed available funding.

Economic Recessions

A significant decline in economic activity spread across the economy lasting more than a few months.