Chapter 13

Question 1

Fiscal Policy

Answer 1

Deliberate changes in government spending and taxes

Question 2

Expansionary fiscal policy

Answer 2

use during recession, increase gov spending decrease taxes.

Question 3

Deficit

Answer 3

Spending more than what is coming in

Question 4

Contractionary fiscal policy

Answer 4

use during demand pull inflation

Question 5

Built in stabilizers

Answer 5

Tax varies directly with GDP, transfers inversely with GDP.

Question 6

Progressive tax

Answer 6

Rich pay higher taxes

Question 7

Proportional tax

Answer 7

flat tax

Question 8

recessive tax

Answer 8

poor pay higher tax

Question 9

Recognition Lag

Answer 9

time it takes to recognize a problem

Question 10

Administrative Lag

Answer 10

Time it takes to put something into place

Question 11

Operational Lag

Answer 11

Time it takes to put policies into action and to work

Question 12

Political business cycles

Answer 12

help re-election instead of the economy

Question 13

Crowding-out effect

Answer 13

Government spending money they don’t have, increasing interest rate

Question 14

US Debt

Answer 14

Owed to the holders of US securities