fiscal policy Flashcards
why are banks relevant
because we rely on them because important to purchase stuff
fiscal policy is
the use of gov spending and taxation to infleunce the economy
expenditures
by govnt
-need labor, creates jobs, stimulates economy
transfer payments
different way to stimulate economy. gov on behlf of citizens choose how to spend money
investment
rare in the US for gov to buy stocks. when a firm, like abnk, are systematically impotrnat to our economy we will
what is the govs primary means of generating revenue
taxation
who sets interest rate
fed, fed setts FFR
how did volker fight inflation
by raising rates crazy
mandatory budgeted expenditures
dictated by prior law and not voted on by congress
mandatory budgeted expenditures ex
medicare
discretionary budgeted expenditures example
national defense and education
interest budgeted expenditures
not productive because citizens font benefit. beneits whoever owns the security
supplemental expenditures are
enacted outside of the orindary appropriations process
supplemental expenditures ex
covid, TARP
when government spends more =
federal expansion
fiscal expansion
increase in discretionary/suplemental spending
fiscal comtraction
decrease in discretionary/supplemental spending
what happens with fiscal contraction
destroy jobs, but at least bring down price level
if most peopple are employed may not use what
fiscal expansion
-would use (-) channel
how does G ingluece C and I positively
HH receive more income and , so they spend more. when people spend more, firms invest more
how does G ingluece C and I negatively
as the govnt increases tax for other resources, it crowds out private consumption and investment
total effect is
direct and indeirect
which effect matters the most
direct effect is leasy important and total is most important
positive indirect effects outweigh the negtive indirect effects is
keynesian hope of amplification
