Chapter 17: Government Budgets and Fiscal Policy

These flashcards cover key economic concepts related to government budgets and fiscal policy, providing definitions and explanations essential for understanding macroeconomic principles.

Budget Deficit

When the federal government spends more money than it receives in taxes in a given year.

Budget Surplus

When the government receives more money in taxes than it spends in a year.

Balanced Budget

When government spending and taxes are equal.

Federal Deficit

The difference between tax revenue collected and spending over a fiscal year.

National Debt

The total accumulated amount the government has borrowed over time and not yet paid back.

Expansionary Fiscal Policy

Fiscal policy that increases the level of aggregate demand through increases in government spending or cuts in taxes.

Contractionary Fiscal Policy

Fiscal policy that decreases the level of aggregate demand through cuts in government spending or increases in taxes.

Automatic Stabilizers

Tax and spending rules that slow down decreases in aggregate demand when the economy slows down and restrain aggregate demand when the economy speeds up.

Discretionary Fiscal Policy

The government passes a new law explicitly to change overall tax or spending levels to influence economic activity.

Crowding Out

When government borrowing and spending results in higher interest rates, which reduces business investment and household consumption.