Fiscal Policy Flashcards
What is fiscal policy?
The use of government spending and revenue collection to influence the economy.
What shapes the government’s taxing and spending decisions?
Both budgetary needs and fiscal policy.
What are the goals of fiscal policy?
- Expand or slow economic growth
- Achieve full employment
- Maintain price stability
What is the federal budget?
A written document estimating the federal government’s revenue and authorizing its spending for the coming year.
What is a fiscal year?
A 12-month period used for budgeting purposes.
When does the federal fiscal year start and end?
From October 1 to September 30.
What do government officials debate during the budget process?
How much should be spent on specific programs such as defense, education, and scientific research.
How can total government spending be adjusted?
It can be raised or lowered to help increase or decrease the output of the economy.
What is the Office of Management and Budget (OMB)?
A government office that manages the federal budget.
What is the role of the OMB in the budget process?
The OMB holds meetings to review federal agencies’ spending proposals and combines them into a single document.
When does the President present the budget to Congress?
In January or February.
What is the Congressional Budget Office (CBO)?
A government agency that provides economic data to Congress.
What is the deadline for Congress to adopt the budget?
By May 15 of the year.
What are appropriations bills?
Bills that authorize a specific amount of spending by the government.
What happens if Congress cannot finish the appropriations bills in time?
It must pass short term emergency spending called ‘stop-gap funding.’
What occurs if Congress and the President cannot agree on temporary funding?
The government ‘shuts down.’
What must happen for appropriations bills to become law?
The President must sign them into law.
What is expansionary fiscal policy?
A fiscal policy used to encourage economic growth, often through increased spending or tax cuts.
What is contractionary fiscal policy?
A fiscal policy used to reduce economic growth, often through decreased spending or higher taxes.
Why would the government deliberately slow down economic output?
To prevent inflation caused by demand exceeding supply.
What is a major limit of fiscal policy?
Difficulty of changing spending levels.
Why is predicting future economic performance difficult?
The state of the economy can change unexpectedly.
What do changes in fiscal policy require before effects are felt?
Time to take effect.
What must government officials balance when enacting fiscal policy?
The need to please voters and do what is best for the economy.
