Econ Chapter 29
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Econ Chapter 29
econ macro fiscal policy
final exam ch.29
The annual statement of the federal government’s outlays and tax revenues is
the federal budget
The federal budget has two purposes:
finance the business of government
pursue the government's fiscal policy
The use of the federal budget to achieve macroeconomic objectives, such as full employment, sustained economic growth, and price level stability, is
Revenues come from:
personal income taxes
corporate income taxes
indirect income taxes
expenditures on goods and services
If revenues exceed outlays, the government has a
If outlays exceed revenues, the government has a
If revenues equal outlays, the government has a
Government debtis the total amount that the government borrows. It is the sum of:
the past deficit budgets minus the sum of the past surplus budgets
An income tax _______ the _______
supply of labour
The vertical gap between the before-tax
and after-tax wage rates is
the tax wedge
When the quantity of labour employed decreases, potential GDP.....
Real after tax rate % =
(Nominal Interest Rate %)(1-Tax Rate %) - Inflation %
Discretionary fiscal policy is a policy action that is
initiated by an act of Parliament.
Automatic fiscal policyis a change in fiscal policy that is
Triggered by the state of the economy
An increase in government expenditure or a tax cut ______ aggregate demand.
*The multiplier process increases aggregate demand further*
A decrease in government expenditure or a tax increase ________ aggregate demand.
The magnification effect of a change in government expenditure on goods and services on aggregate demand is the
Government expenditure multiplier
The magnification effect of a change in autonomous taxes on aggregate demand is the
Autonomous tax multiplier
The magnification effect on aggregate demand of a simultaneous change in government expenditure and taxes that leaves the budget balance unchanged is the
Balanced budget multiplier
Is the time it takes to figure out that fiscal policy actions are needed.
Is the time it takes parliament to pass the laws needed to change taxes or spending.
Is the time it takes from passing a tax or spending change to its effects on real GDP being
Automatic stabalizers are
mechanisms that stabilize real GDP without explicit action by the government.
Induced taxes and needs-tested spending are automatic stabilizers.
Taxes that vary with real GDP are
When the economy is in a recession, unemployment is _____ and transfer payments ______.
When the economy expands, unemployment _____ and transfer payments ______.
Induced taxes and transfer payments _______ the multiplier effects of changes in autonomous expenditure.
The budget balance that would occur if the economy were at full employment and real GDP were equal to potential GDP is the
Structural surplus or deficit
The actualy surplus or deficit minus the structural surpllus or deficit is the
Cyclical surplus or deficit