Economics: Unit 6 Learning Targets 2 - "Monetary and Fiscal Policy: Solving Economic Inefficiencies" Vocabulary

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8 Terms

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Fiscal Policy

Changes in government spending and taxes in order to achieve full-employment & full efficiency. The Federal Government (the president and congress) is in charge of Fiscal Policy.

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Expansionary Fiscal Policy

An increase in government spending and/or a decrease in taxes designed to increase AD (shift AD curve to the right) to eliminate a recessionary gap & get to full efficiency.

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Contractionary Fiscal Policy

A decrease in government spending and/or an increase in taxes designed to decrease AD (shift AD curve to the left) to eliminate an inflationary gap & get to full efficiency.

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Supply-Side Fiscal Policy

A fiscal policy that emphasizes government policies that increase aggregate supply in order to eliminate Stagflation and get to full efficiency.

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Monetary Policy

Changes in the money supply in order to achieve full-employment & full efficiency. The Federal Reserve (the central bank of the US) is in charge of Monetary Policy.

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Federal Reserve

The central bank of the United States & is also in charge of Monetary Policy.

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Contractionary Monetary Policy

A decrease in the amount of money in circulation designed to decrease AD (shift AD curve to the left) to eliminate an inflationary gap & get to full efficiency.

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Expansionary Monetary Policy

An increase in the money supply designed to increase AD (shift AD curve to the right) to eliminate a recessionary gap & get to full efficiency.