Untitled Flashcards Set

Social insurance programs - government programs intended to protect families against financial hardship

Medicare- covers healthcare for individuals over 65

Medicaid- low income healthcare

Change in government policy affects consumer spending in the gdp equation as well because if taxes increase, tc disposable income will change 

Fiscal policy- government changes in order to shift aggregate demand and supply chart

Expansionary fiscal policy-fiscal policy that increases aggregate demand (shifting it to the right) to close recessionary gap

Expansionary fiscal policy - an increase in government purchases of goods and services, cut in taxes,increase in government transfers

Contractionary fiscal policy- meant to eliminate inflationary gaps by shifting aggregate demand to the left , reduction of government purchases of goods and services, an increase in taxes, a reduction of gov transfers

Money multiplier - (1-(1-mpc))

Lump sum taxes- taxes that don't depend on the taxpayers income

Automatic stabilizers- government spending and taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts and automatically contracts when it expands

Discretionary fiscal policy- fiscal policy that is the direct result of deliberate actions by policy makers rather than automatic adjustment

Budget balance- saving by government= tax revenue-good and services-government transfers

Budget surplus- a positive budget balance

Budget deficit-a negative budget balance

Expansionary fiscal policy effect on budget- makes budget surplus bigger or budget deficit smaller

Cyclically adjusted budget balance-estimate of what the budget balance would be if real gdp was exactly equal to potential output 

Fiscal years-runs from october 1 to september 30 and is labeled according to the calendar year in which it ends

Implicit liability- spending promises made by government that are effectively a debt despite the fact that they aren't included in debt statistics

• Discretionary fiscal policy: refers to deliberate changes in government spending or taxation aimed at influencing economic activity.