Term
| When is contractionary fiscal policy used? |
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Definition
| Periods of high employment and inflation |
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Term
| When is expansionary fiscal policy used |
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Definition
| Periods of recessions to boost aggregate AD and close the recessionary gap. |
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Term
| Expansionary/Contractionary fiscal policy ____/____ AD, shifts the AD curve _____/_____, and closes the ______/______ gap |
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Definition
| increases/decreases; up/down; increses/decreases; recessionary/inflationary |
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Term
| How doya solve for the Tax multiplier? |
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Definition
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Term
| What is meant by fiscal policy? |
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Definition
| type of stabilization policy tht involves the use of changes in taxation, gov trans, or gov purch of goods/serv |
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Term
| Contractionary policy is used during periods of _____________ |
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Definition
| high employment and inflation |
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Term
| How doya solve for the spending multiplier? |
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Definition
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Term
| The tax multiplier is _____ than the spending multiplier because __________ |
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Definition
| part of any change in taxes goes to savings in the first round of spending |
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Term
| What are automatic stabilizers? |
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Definition
| Gov sending and taxation rules that cause fiscal policy to be expansionary/contractionary when the economy contracts/expands. (e.g. Taxes tht depnd on disposable income) |
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Term
| What are the main sources of the federal tax revenues are_____? |
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Definition
Personal income taxes
Social insurance taxes
Corporate profit taxes. |
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Term
| What are the main federal government expenditure programs? |
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Definition
Medicare and Medicaid
Other transfer payments
National defense
Social security
Education |
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Term
| In the case where government expenditures are exactly equal to tax revenues in a given year, the government is running a _______ for that year. |
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Definition
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Term
| expansionary/contractionary fiscal policy are defined as _____ /____ |
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Definition
| an increase/decrease in government expenditures and/or a decrease/increase in taxes that causes the government's budget deficit to increase/decrease or its budget surplus to decrease/increase. |
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Term
| What do classical economists think of expansionary/contractionary fiscal policies? |
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Definition
| such policies are unnecessary because there are market mechanisms—e.g. the flexible adjustment of prices and wages—which serve to keep the economy at or near the natural level of real GDP at all times. Accordingly, classical economists believe that the government should run a balanced budget each and every year. |
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