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10 Cards in this Set
- Front
- Back
Expansionary fiscal policy |
when the government increases spending or decreases taxes to stimulate the economy toward expansion |
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Contractionary fiscal policy |
when the government decreases spending or increases taxes to slow economic expansion |
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Countercyclical fiscal policy |
fiscal policy that seeks to counteract business-cycle fluctuations |
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Marginal propensity to consume (MPC) |
the portion of additional income that is spent on consumption |
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Spending multiplier (m^s) |
a formula to determine the total impact on spending from an initial change of a given amount
m^s = 1/(1-MPC) |
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Automatic stabilizers |
government programs that automatically implement countercyclical fiscal policy in response to economic conditions |
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Crowding-out |
occurs when private spending falls in response to increases in government spending |
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New classical critique of fiscal policy |
asserts that increases in government spending & decreases in taxes are largely offset by increases in savings |
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Supply-side fiscal policy |
involves the use of government spending & taxes to affect the production (supply) side of the economy |
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Laffer curve |
an illustration of the relationship between tax rates & tax revenues |