Term
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Definition
| total real planned expenditure |
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Term
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Definition
| total real output of final goods and services (real GDP) |
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Term
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Definition
| a graph showing the relationship between aggregate demand and the aggregate price level |
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Term
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Definition
| policy that is concerned with government purchases, taxes, and transfer payments |
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Term
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Definition
| the set of channels through which monetary policy affects aggregate demand |
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Term
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Definition
| a graph showing the relationship between real output (real domestic product) and the average price level of final goods |
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Term
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Definition
| a measure of the average prices of labor, raw materials, and other inputs that firms use to produce goods and services |
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Term
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Definition
| an economice policy strategy that attempts to avoid even small, short-run departures from full employment and price stability |
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Term
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Definition
| delays between the time a problem develops and the time policymakers decide what to do about it |
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Term
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Definition
| delays between the time policymakers reach a decision and the time the resulting policy action affects the economy |
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Term
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Definition
| tendency of policymakers to take actions that have desirable results in the short-run, but undesirable long-run results |
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Term
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Definition
| a set of rules for monetary and fiscal policy that specifies in advance the actions that policymakers will take in response to economic developments |
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Term
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Definition
| a variable directly under the control of policymakers |
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Term
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Definition
| a variable that responds immediately to these of a policy instrument |
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Term
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Definition
| a variable that responds to the use of a policy instrument or a change in operating target with a significant lag |
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Term
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Definition
| A long-run objective of economic policy that is important for economic welfare |
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Term
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Definition
| a school of economic thought that emphasized the importance of the quantity of money and advocated the use of stable rules for monetary policy |
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Term
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Definition
| a strategy for stabilization policy that focuses on holding the rate of inflation within a target range |
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Term
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Definition
| a rule that adjusts monetary policy according to change in the rate of inflation and the output gap (or unemployment) |
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Term
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Definition
| a policy under which the central bank adopts the rate of growth of nominal GDP as its principal intermediate target |
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Term
| Accommodating Monetary Policy |
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Definition
| a policy in which the central bank holds interest rates constant in response to a fiscal stimulus |
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Term
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Definition
| the tendency of expansionary fiscal policy to raise the interest rate and thereby cause a decrease in real planned investment |
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Term
| Discretionary Fiscal Policy |
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Definition
| changes in the laws regarding government purchases and net taxes |
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Term
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Definition
| changes in government purchases or net taxes that are the results of changes in economic conditions, given unchanged tax and spending laws |
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Term
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Definition
| those elements of automatic fiscal policy that move the federal budget toward deficit during an economic contraction and toward surplus during an expansion |
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Term
| Structural Budget Balance |
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Definition
| the deficit or surplus that would prevail in any year given that year's tax |
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Term
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Definition
| the difference between the actual budget balance in a given year and the structural balance that would have prevailed with the same tax and spending laws |
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Term
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Definition
| the federal government's budgetary year, which starts on October 1 of the preceding calendar year |
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Term
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Definition
| federal benefit programs such as social security and Medicare that are not subject to the annual budget process |
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Term
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Definition
| a tax deduction or other tax preference that the government enacts to induce households or firms to behave in a way that serves some purpose of public policy |
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Term
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Definition
| the shared physical systems, such as roads power grids, and water systems on which economic activity depends |
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Term
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Definition
| a financial position is sustainable if it maintains a pattern of income and expenditures that can continue over time without leading to insolvency |
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Term
| Government Budget Constraint |
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Definition
| the relationship between what the government buys and the sources of funds needed to make the purchases |
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Term
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Definition
| financing government spending through an increase in the monetary base |
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Term
| Fiscal Consolidation (Fiscal Austerity) |
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Definition
| the process of reducing government spending and increasing taxes by enough to make the deficit sustainable |
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Term
| Balanced Budget Amendment |
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Definition
| any of a number of proposals to amend the US constitution in a way that would require the federal government to limit its spending each year to the amount of tax revenue that it receives |
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Term
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Definition
| inflation caused by an upward shift of the aggregate demand curve while the aggregate supply curve remains fixes or shifts upward at no more than an equal rate |
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Term
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Definition
| inflation that begins with an upward shift in the aggregate supply curve while the aggregate demand curve remains fixed or shifts upward more slowly |
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Term
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Definition
| an event not arising from changes in aggregate demand that changes the average level of expected input prices |
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Term
| Inflation Inertia (Inflation Momentum) |
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Definition
| a tendency of firms and workers to expect prices to continue rising in the future at the same rate as in the immediate past |
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Term
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Definition
| an episode in which real output falls toward or below its natural level and unemployment rises toward or above its natural rate while rapid inflation continues |
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Term
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Definition
| a graph showing the relationship between the inflation rate and the unemployment rate, other things being equal |
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Term
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Definition
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Term
| Exchange-Rate Based Stabilization (ERB Stabilization) |
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Definition
| a policy that uses a fixed exchange rate as the principal tool for ending hyperinflation |
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Term
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Definition
| a period of falling prices caused by a decrease in aggregate demand |
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Term
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Definition
| a period of falling prices cause by a decrease in the expected costs of production |
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Term
| Zero Interest Rate Bound (ZIRB) |
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Definition
| the principle that nominal rates cannot fall below zero |
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Term
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Definition
| a situation in which monetary policy loses its effectiveness as nominal interest rates approach zero |
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Term
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Definition
| the use of central bank policies that increase the quantity of bank reserves and money in order to stimulate the economy after interest rates have hit the zero bound |
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