ECO Ch. 12

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  1. What was the stimulus plan for the 2008 recession called?
    American Recovery and Reinvestment Act of 2009
  2. 2 parts of the American Recovery and Reinvestment Act. (IC)
    • 1. Included tax cuts and an increase in government spending
    • 2. Cost $800 billion
  3. Government decisions about the level of taxation and public spending.
    Fiscal policy
  4. 2 parts of fiscal policy. (IC)
    • 1. Increases or decreases AD
    • 2. Can indirectly affect C and I
  5. Fiscal policy affects AD through which 2 channels? (GT)
    • 1. Government spending
    • 2. Tax policy
  6. Tax policy directly affects what?
  7. What does consumption depend on?
    Disposable income
  8. Decisions about taxation and spending intended to increase AD.
    Expansionary fiscal policy
  9. Decisions about taxation and spending intended to decrease AD.
    Contractionary fiscal policy
  10. An expansionary policy where the government spends more or taxes less.
  11. 3 types of lags in the policy-making process. (IFI)
    • 1. Information lag
    • 2. Formulation lag
    • 3. Implementation lag
  12. A lag that involves understanding the current economic situation.
    Information lag
  13. A lag that involves the process of deciding on and passing legislation.
    Formulation lag
  14. A lag that involves the time it takes for the policy to affect the economy.
    Implementation lag
  15. Taxes and government spending that affect fiscal policy without specific actions from policy-makers.
    Automatic stabilizers
  16. Another name for targeted fiscal policy.
    Discretionary fiscal policy
  17. A policy the government actively chooses to adopt
    Targeted/Discretionary fiscal policy
  18. The 2009 stimulus bill was an example of what?
    Targeted/Discretionary fiscal policy
  19. Discretionary fiscal policy via taxes requires policy-makers to change what?
    Tax rates
  20. Using taxes as automatic stabilizers affects what?
    Tax revenues
  21. Changes in tax revenues = ?
    Automatic stabilizers
  22. Changes in tax rates = ?
    Discretionary policy
  23. In a recession, fiscal policy automatically becomes what?
  24. In a boom, fiscal policy automatically becomes what?
  25. Theory that predicts if the government cuts taxes, but not spending, people will not change their behavior.
    Ricardian equivalence
  26. Measures the effect of government spending or tax cuts on national income.
    The multiplier
  27. An increase in consumer spending that occurs when spending by one person causes others to spend more too, increasing the impact of the initial spending on the economy.
    Multiplier effect
  28. What does the multiplier effect suggest?
    Spending $1 increases GDP by more than $1
  29. The amount that consumption increases when after-tax income increases by $1.
    Marginal propensity to consume
Card Set:
ECO Ch. 12
2014-11-10 07:34:10

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