ch 11 macroeconomics
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The use of goverment spending and taxes to influence the nation's spending, employment and price level.
Discretionary fiscal policy
The deliberate use of changes in goverment spending or taxes to alter aggregate demand and stabilize the economy.
Spending Multiplier (SM)
- The change in aggregate demand (total spending) resulting from an initial change in any component of aggregate expenditures, including cosumption, investment, goverment spending and net exports.
- 1/(1-MPC) or 1/(MPS)
Balanced budget multiplier
An equal change in goverment spending and taxes, which changes aggregate demand by the amount of the change in goverment spending.
Federal spenditures and tax revenues that automatically change levels in order to stabilize an economic expanson or contraction.
A budget in which goverment revenues exceed goverment expenditures in a given time period.
A budget in which goverment expenditures exceed goverment revenues in a given time period.
Supply-side fiscal policy
A fiscal policy that emphasizes goverment policies that increase aggregate supply in order to achive long-run growth in real output, full employment and a lower price level.
A greph depicting the relationship between tax rates and total tax revenues.
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