Government purchases that are for public goods are those provided for everyone and exclude no one from their use.
A good or service that the government provides that can be sold in a private market such as education or ambulance.
A tax with a direct relationship between the percentage of income taxed and the size of the income. The higher the income, the higher the percentage is to be taxed.
Flat Tax. The percentage of income taxed is the same for all no matter how high or low the income is.
The percentage of income taxed varies inversely with the size of the income. The percentage increases as income decreases and decreases as income increases.
Tax Reform Act of 1986
Major legislation that changed federal income tax exemptions, deductions, brackets and rates.
When the federal government changes its spending and/or taxing to control unemployment or demand-pull inflation, it is putting fiscal policy into play.
Automatic Fiscal Policy/Automatic Stabilization
Changes in government expenditures and/or taxes that occur automatically as the level of economic activity changes; helps to control unemployment or demand-pull inflation
Programs set up by the government to pay benefits to people who meet eligibility requirements for the program.
A governments expenditures are more than its income.
A governments income is greater than its expenses.
Occurs when borrowing by the federal government reduces borrowing by households and businesses.
Medium of Exchange
Something that is generally accepted as payment for goods, services, and resources; the primary function of money.
Measure of Value
It is a function of money; the value of every good, service and resource can be expressed in terms of an economy's base unit of money.
Velocity of Money
Average number of times the money supply is turned over in a year in relationship to GDP.
Institution that holds and maintains checking accounts (demand deposits) for its customers, makes commercial (business) and other loans, and performs other functions.
Open Market Committee
Oversees the buying and selling of government securities by the Federal Reserve System.
Equation of Exchange
MV = PQ; illustrates how changes in the supply of money (M) influence the level of prices (P) and/or the total output of goods and services (Q). V stands for velocity of money or the nmber of times each dollar is spent for new goods and services in a year.
Multiple by which an initial change in excess reserves in the system can change the money supply.
Reserves of a financial depository institution over the amount it is required to maintain in actual reserves; actual reserves minuse required reserves.Reserves over and above those taht an institution must maintain.
Specific percentage of deposits that a financial depository institution must keep as actual reserves.
Interest rate that a Federal Reserve bank charges a financial depository institution for borrowing reserves.
Changing the money supply to influence the levels of output, employment, and/or prices in the economy.
Open Market Operations
The buying and selling of securities, primarily U. S. government securities, on the open market by the Federal Reserve.
Monetizing the Debt
Increasing the money supply by the Federal Reserve to accommodate federal government borrowing and reduce upward pressure on the interest rate.
Popularly accepted theory prior to the Great Depression of the 1930s; says the economy will automatically adjust to full employment.
Based on the work of John Maynard Keynes (1883-1946), who focused on the role of aggregate spending in determining the level of macroeconomic activity.
Occurs when an economy experiences high rates of inflation and unemployment.
Curve showing the relationship between an economy's unemployment and inflation rates.
An economy where foreign influences have no effect on output, employment, and prices.
An economy where foreign influences have an effect on output, employment, and prices.
Persons who favor the economic policies of monetarism.