Term
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Definition
| structural features of government spending and taxation that reduce fluctuations in disposable income, and thus consumption, over the business cycle |
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Term
| discretionary fiscal policy |
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Definition
| the deliberate manipulation of government purchases, taxation, and transfer patents to promote macroeconomic goals, such as full employment, price stability, and economic growth |
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Term
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Definition
the ratio of a change in real GDP demanded to the initial change in autonomous net taxes that brought it about; the numerical value of the simple tax multiplier is
-MPC/(1-MPC) |
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Term
| expansionary fiscal policy |
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Definition
| an increase in government purchases decrease in net taxes, or some combination of the two aimed at increasing aggregate demand enough to reduce unemployment and return the economy to it potential output; fiscal policy used to close a recessionary gap |
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Term
| contractionary fiscal policy |
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Definition
| a decrease in government purchases, increase in net taxes, or some combination of the two aimed at reducing aggregate demand enough to return the economy to potential output without worsening inflation; fiscal policy used to close an expansionary gap |
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Term
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Definition
| a group of 18th and 19th century economists who believed that economic downturns corrected themselves though natural market forces; thus, they believed that the economy was self-correcting and needed no government intervention |
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Term
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Definition
| law that assigned to the federal government the responsibility for promoting full employment and price stability |
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Term
| political business cycles |
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Definition
| economic fluctuations that occur when discretionary policy is manipulated for political gain |
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Term
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Definition
| income that individuals expect to receive on average over the long term |
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Term
| american recovery and reinvestment act |
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Definition
| at an estimated cost of $862 billion, the largest stimulus measure in US history; enacted in February 2009 and projected to last 2 years |
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