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Chapter 13
Vocabulary & Key Concepts
22
Economics
12th Grade
04/22/2013

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Term
social insurance
Definition
government programs intended to protect families against economic hardship
Term
expansionary fiscal policy
Definition
increases aggregate demand
Term
contractionary fiscal policy
Definition
reduces aggregate demand
Term
in the United States, most government transfers are accounted for by _____ programs - principally Social Security, Medicare, & Medicaid - programs designed to alleviate economic hardship
Definition
social insurance
Term
_____ is implemented by an increase in government spending, a cut in taxes, or an increase in government transfers
Definition
expansionary fiscal policy
Term
_____ is implemented by a reduction in government spending, an increase in taxes, or a reduction in government transfers
Definition
contractionary fiscal policy
Term
lump-sum taxes
Definition
taxes that don't depend on the taxpayer's income
Term
automatic stabilizers
Definition
government spending & taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts & automatically contractionary when the economy expands
Term
discretionary fiscal policy
Definition
fiscal policy that is the result of deliberate actions by policy makers rather than rules
Term
taxes reduce the size of the multiplier unless they are _____
Definition
lump-sum taxes
Term
taxes & some government transfers act as _____ as tax revenue responds positively to changes in real GDP & some government transfers respond negatively to changes in real GDP
Definition
automatic stabilizers
Term
in contrast to automatic stabilizers, the use of _____ is more controversial
Definition
discretionary fiscal policy
Term
cyclically adjusted budget balance
Definition
an estimate of what the budget balance would be if real GDP were exactly equal to potential output
Term
the _____ is an estimate of what the budget balance would be if the economy were at potential output
Definition
cyclically adjusted budget balance
Term
fiscal year
Definition
runs from October 1 to September 30 & is labeled according to the calendar year in which it ends
Term
public debt
Definition
government debt held by individuals & institutions outside the government
Term
debt-GDP ratio
Definition
the government's debt as a percentage of GDP
Term
implicit liabilities
Definition
spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics
Term
persistent budget deficits lead to increases in _____
Definition
public debt
Term
the fact that rising public debt can lead to government default or reduction in long-run growth suggests that budget deficits in bad _____ should be offset with budget surpluses in good fiscal years
Definition
fiscal years
Term
a widely used indicator of fiscal health is the _____
Definition
debt-GDP ratio
Term
in addition to their official public debt, modern governments have _____
Definition
implicit liabilities
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