AP Macro Unit 5

expansionary fiscal policy

spending of the government; increases AD curve in the short-run (creates budget deficit when originally balanced)

fiscal policy is of the national gov, and monetary is of central banks type

contractionary fiscal policy

decreases AD curve in the short-run (creates budget surplus when originally balanced)

budget deftcit

T<G+TR

budget surplus

T>G+TR

built-in stabilizer

automatically helps with inflationary / contractionary periods (e.g. progressive tax brackets, welfare)

discretionary policy

based on decisions of legislature rather than by pre-determined things

progressive tax system

more taxed as more money

regressive tax system

less taxed as more money

proportional tax system

no change in tax rate regardless of income (e.g. all pay 10%)

crowding-out effect

increase in gov borrowing means right-shift of quantity of loanable funds demanded means more crowing out b/c increase in real interest rate :(

net export effect

more net exports is more moneyyyyyy

Federal Reserve Board of Governors

the people who control MONEY

open-market operations

buying / selling bonds by governments, giving banks moneuyyyy

discount rate

reserve requirement

short run Phillips curve

shows inverse relationship between unemployment and inflation rate

long run Phillips curve

shows that in the long run, inflation only affects price level (NOT unemployment)

stagflation

inflation & high unemployment at the same time :(

aggregate supply shocks

long-run vertical supply curve

shows the natural rate of unemployment (affected by changes in productivity and idk if we invade a country so more straight resources ig;

supply-side economics

economic growth

labor productivity

human capital

infrastructure

build buildings (places for growth)