council of economic advisors
an executive agency responsible for providing economic advice to the President
expansionary fiscal policy
An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output
budget deficit
an excess of expenditures over revenues
contractionary fiscal policy
A decrease in government spending or an increase in taxes
budget surplus
an excess of tax revenue over government spending
proportional tax system
The average tax rate remains constant as GDP rises
regressive tax system
The average tax rate falls as GDP rises
standardized budget
measures what the Federal budget deficit or surplus would be without existing tax rates and the government spending levels if the economy had achieved its full-employment level of GDP in each year
cyclical deficit
A federal budget deficit that is caused by a recession and the consequent decline in tax revenues Ex) When the economy is in a recession and the government doesn't get as many taxes
recognition lag
The time period after a policy change is needed from a stabilization standpoint but before the need is recognized by policy makers.
administrative lag
The time period after the need for a policy change is recognized but before the policy is actually implemented.
operational lag
(PoT) the effects after fiscal policy occurs may take a while till any change occurs. tax changes usually quicker then changes in spending
political business cycles
economic fluctuations that occur when discretionary policy is manipulated for policital gain
crowding out effect
This occurs when government spending is financed through borrowing from the private sector, which puts upward pressure on interest rates and stop private investors who cannot afford to borrow at the higher rates of interest.
public debt
The total amount of money that the national government owes as a result of borrowing; also called the national debt.
US securities
financial instruments issued by the Fed to borrow money to finance expenditures that exceed tax revenues
external public debt
The portion of the public debt owed to foreign citizens, firms, and institutions
fiscal policy
a government policy for dealing with the budget (especially with taxation and borrowing)
built in stabilizer
A mechanism that increases government's budget deficit (or reduces its surplus) during a recession and increases government's budget surplus (or reduces its deficit) during inflation without any action by policymakers. The tax system is one such mechanism
progressive tax
any tax in which the rate increases as the amount subject to taxation increases
public investments
Governemnt expenditures on public capital (such as roads, highways, bridges, mass transit systems, and electric power facilities) and on human capital (such as education, training, and health).