Important Terms

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9 Terms

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Discretionary Fiscal Policy

intentional changes in federal taxes and purchases that are intended to achieve macroeconomic policy goals

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Fiscal Policy

changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives

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Expansionary Fiscal Policy

increasing government purchases or decreasing taxes

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Contractionary Fiscal Policy

decreasing government purchases or increasing taxes

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Countercyclical Fiscal Policy

policy measures which counteract the effects of the economic cycle

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Multiplier Effect

The process by which a change in autonomous expenditure leads to a larger change in real G D P

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Government purchases mulitplier

The change in overall economic output when the government spends money or cuts taxes

<p>The change in overall economic output when the government spends money or cuts taxes</p>
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Tax Multiplier

how much a change in taxes affects GDP

<p>how much a change in taxes affects GDP</p>
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Marginal Propensity to Import (MPI)

the fraction of an increase in income spent on imports.