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Economics C15: Fiscal Policy

Terms

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What is Fiscal Policy?
The use of government spending & revenue collection to influence the economy
What is the Federal Budget?
A plan for the federal government's revenues and spending for the coming year.
What is a Fiscal Year?
A twelve-month period that can begin on any date.
What is the Office of Management and Budget (OMB)?
Government office that manages the federal budget.
What is the Congressional Budget Office (CBO)?
Government agency that provides economic data to Congress.
What is an Appropriations Bill?
A bill that sets money aside for specific spending.
What are Expansionary Policies?
Fiscal policies, like higher
spending and tax cuts, that encourage economic growth
What are Contractionary Policies?
Fiscal policies, like lower spending, and higher taxes tha reduce economic growth.
What is Classical Economics?
The idea that free markets can regulate themselves.
What is Productive Capacity?
The maximum output that an economy can produce without big increases in inflation
What is Demand-Side Economics?
The idea that government spending and tax cuts help an economy by raising demand
What is Keynesian Economics?
A form of demand-side economics that encourages government action to increase or decrease demand and output.
What is the Multiplier Effect?
The idea that every one dollar of government spending creates more than one dollar in economic activity.
What is an Automatic Stabilizer?
A government program that changes automatically depending on GDP and a person's income.
What is Supply-Side Economics?
A school of economics that believes tax cuts can help an economy by raising supply.
What is the Council of Economic Advisors? (CEA)
A group of three respected economists that advise the President on economic policy.
What s a Balanced Budget?
A budget in which revenues are equal in spending.
What is a Budget Surplus?
A situation in which the government spends more than it takes in.
What is Hyperinflation?
Very high inflation
What is a Treasury Bill?
A government bond that is repaid within three months to a year.
What is a Treasury Note?
A government bond that is repaid within two to ten years.
What is a Treasury Bond?
A government bond that can be issued for as long as 30 years.
What is the National Debt?
All the money the federal government owes to bondholders.
What is the Crowding-Out Effect?
The loss of funds for private investment due to government borrowing.
What is "Servicing the Debt"
Paying the interest on the debt which is ever increasing & those dollars cannot be spent on defense, health care, or infrastructure.
What is the Budget Enforcement Act of 1990?
A "Pay-As-You-Go" system that requires Congress to raise enough revenue to cover increases in direct spending so the budget deficit can't grow larger.
What are two problems with the National Debt?
1. It reduces the funds available for businesses to invest 2. The government must pay interest to bondholders = high interest

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