Term
| Discretionary Fiscal Policy |
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Definition
| Changes in government spending and tax collections designed to achieve a full employment and non inflationary domestic output. Used to control or regulate the business cycle. |
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Term
| Expanisionary Fiscal Policy |
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Definition
1) Increase government spending
2) reduce taxes
3) combination of the two
Pursue Expansionary Fiscal Policy in a recession. |
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Term
| Calculate the Increases or Decreases in Taxes |
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Definition
| Ch Real GDP = (MPC)M x Ch T |
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Term
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Definition
| federal open market committee, in charge of selling securities in the open market |
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Term
| Money Multiplier Equation |
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Definition
m=1/R, Monetary Multiplier = 1/Required Reserve Ratio
It magnifies excess reserves into a larger creation of checkable-deposit money. |
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Term
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Definition
| Board of Governors controls |
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Term
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Definition
Recognition: beginning of recession/awareness
Wait and See: continued recession/inflation Legislation: between need identified & solution Transmission: between action taken & effect Effectiveness: if action had effect |
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Term
| When money supply increases |
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Definition
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Term
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Definition
| Deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth. |
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Term
| Calculate the Change in Real GDP. |
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Definition
| Change in Real GDP = M x Change in Initial Spending |
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Term
| Calculate the Multiplier. |
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Definition
| Multiplier = 1/MPS or 1/(1-MPC) |
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Term
| Calculate the change in Government Spending need to close the GDP Gap. |
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Definition
| Change in Government Spending = GDP Gap / M |
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Term
| Calculate the increase or decrease in Taxes. |
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Definition
| Change in Real GDP = (MPC)M x Change in Taxes |
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Term
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Definition
| Government spending in excess of tax revenues. |
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Term
| Contractionary Fiscal Policy |
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Definition
Contractionary Fiscal Policy helps control demand-pull inflation.
1) Decrease government spending
2) Increase taxes
3) combination of the two |
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Term
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Definition
| anything that increases the Government's budget deficit during a recession and increases its budget surplus during an expansion without requiring explicit action by policy makers. Advantage is that it doesn't require action by congress, but could take a lot of time. Examples: U.S. Tax System |
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Term
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Definition
| An expansionary fiscal policy may increase the interest rate and reduce investment spending, thereby weakening or canceling the stimulus of the expansionary policy. When the government increases spending, spending in the private sector may decrease. |
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Term
| Calculate the Value of the Dollar. |
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Definition
$V = 1/P
Value of the Dollar = 1/Price Level
When the price of goods goes up, the value of the dollar goes down. |
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Term
| The difference between a budget deficit and the public debt |
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Definition
Budget Deficit - government spending greater than tax revenue for one year
Public Debt - the accumulation over time of budget deficits that are offset by any budget surpluses |
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Term
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Definition
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Term
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Definition
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Term
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Definition
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Term
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Definition
| Reserve Ratio = Commercial bank's Required Reserves / Commercial bank's Checkable-Deposit Liabilities |
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Term
| Calculate Excess Reserves |
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Definition
| Excess Reserves = Actual Reserves - Required Reserves |
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Term
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Definition
| 4% Federal Funds Rate, 2% Inflation Rate is tolerable. For every 1% above that, the Real Federal Funds rate goes up by .5% and the Nominal Federal Funds rate goes up by 1.5%. |
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