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Economics Today - 16th ed. - Ch. 13 Key Terms
Ch.13
9
Economics
Undergraduate 2
10/25/2012

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Term
fiscal policy
Definition
The discretionary changing of government expenditures or taxes to achieve national economic goals, such as high employment with price stability.
Term
crowding-out effect
Definition
The tendency of expansionary fiscal policy to cause a decrease in planned investment or planned consumption in the private sector. This decrease normally results from the rise in interest rates.
Term
Ricardian equivalence theorem
Definition
The proposition that an increase in the government budget deficit has no effect on aggregate demand.
Term
direct expenditure offsets
Definition
Actions on the part of the private sector in spending income that offset government fiscal policy actions. Any increase in government spending in an area that competes with the private sector will have some direct expenditure offset.
Term
supply-side economics
Definition
The suggestion that creating incentive for individuals and firms to increase productivity will cause the aggregate supply curve to shift outward.
Term
recognition time lag
Definition
The time required to gather information about the current state of an economy.
Term
action time lag
Definition
The time between recognizing an economic problem and implementing policy to solve it. The action time lag is quite long for fiscal policy, which requires congressional approval.
Term
effect time lag
Definition
The time that elapses between the implementation of a policy and the results of that policy.
Term
automatic/built-in stabilizers
Definition
Special provisions of certain federal programs that cause changes in desired aggregate expenditures without the action of Congress and the president.
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