Labor Market/Fiscal Policy Flashcards

Flashcards about Labor Market and Fiscal Policy

Labor Force

All those 16 years or older who are working or actively seeking work (human resources).

Labor Force Participation Rate

Measures the percentage of Americans in the Labor Force.

Unemployment Rate

Percentage of the labor force seeking work

Employment Rate

Percentage of the labor force working

Full Employment

Exists when virtually all human resources available are being utilized efficiently.

Frictional Unemployment

“In between jobs” - Time frame required to match workers and employers

Structural Unemployment

“Currently unemployable” - Elimination of jobs due to technological shifts in the economy

Seasonal Unemployment

The prevention of work that is available, due to weather. Contrasts “Seasonal Employment.”

Demand Deficient Unemployment

“Cyclical” due to decreased consumer demand.

Natural Rate of Unemployment

Normal, healthy, and expected in a growing economy. Includes Frictional, Structural, Seasonal but NOT Cyclical unemployment.

Phillips Curve

Depicts the inverse relationship between inflation and unemployment

Stagflation (Stagnate/Inflation)

Period of low production, slow economic growth AND inflation.

Stagflation Meaning

Inflation with unemployment, contradicting the Phillips Curve.

Supply Side Economic Theory

The use of aggregate supply to influence the economy.

Say’s Law

Increased supply creates its own demand.

Fiscal Year

12 month accounting cycle, divided into quarters, regarding tax revenue and expenditure. *(Oct. 1 – Sept. 30)

Fiscal Policy

Budget position concerning “taxing and spending” to influence the economy

Non-discretionary Fiscal Policy

Automatic stabilizers in place to regulate the economy. (progressive tax rates, unemployment benefits)

Discretionary Fiscal Policy

Intentional changes to government taxing and spending to affect the economy.

Laffer Curve

Represents the relationship between government tax rates and tax revenue. The relationship is extreme at 0% and 100%.

Contractionary Fiscal Policy

Raise taxes (T) and cut govt spending (G) to slow economic growth/fight inflation. Creates a Budget Surplus

Expansionary Fiscal Policy

Decreasing taxes (T) and raising government spending (G) to promote economic growth. Creates a Budget Deficit

Deficit Spending

Annual governmental expenditure in excess of tax revenues

Funding

Borrowing through the sale of government securities (bonds) to pay off existing debt and “fund” current deficit.

National Debt

Cumulative deficit spending, owed by Americans

Crowding Out

Private borrowing will decrease, offsetting expansionary fiscal policy due to higher interest rates

Debt Ceiling

Set by law, establishing a maximum amount of money the federal Government can borrow.