Chapter 11: Fiscal Policy, Surpluses and Debt

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  1. Define Fiscal Policy
    Changes in government spending and taxation to shift the aggregate demand curve to the right or to the left
  2. Define Discretionary Fiscal Policy
    • The DELIBERATE change of government expenditures and taxes to promote:
    • full employment
    • price stability
    • economic growth
  3. Define Expansionary Fiscal Policy
    Increase in government spending & decrease in taxes to increase aggregate demand (shift aggregate demand curve to the right)
  4. Define Contractionary Fiscal Policy
    Decrease in government spending & increase in taxes to decrease aggregate demand (shift aggregae demand curve to the left)
  5. Define Budget Defecit
    Amount by which government expenditures exceed revenues
  6. Define Budget Surplus
    Amount by which revenues exceed expenditures
  7. Define Stabilizer
    • Results from net taxes
    • Lessens, but does not fully correct, undesired changes in GDP
    • Measures the federal budget defecit or surplus that would occur if the government were to operate at full employment
    • Reveals whether fiscal policy is expansionary, neural or contractionary
    • Expansionary when CAB is positive
    • Contractionary when CAB is negative
  9. Public Debt
    Total accumulation of government's defecits (minus surpluses) over time
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Chapter 11: Fiscal Policy, Surpluses and Debt
Chapter 11: Fiscal Policy, Surpluses and Debt
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