Section 1

Question 0

Fiscal policy

Answer 0

Uses taxes and government spending to affect the economy.

Question 1

Fiscal

Answer 1

Refers to government revenue, spending, and debt.

Question 2

Expansionary fiscal policy

Answer 2

Is a plan to increase aggregate demand and stimulate the economy.

Question 3

Contractionary fiscal policy

Answer 3

Is a plan to reduce aggregate demand and slow the economy.

Question 4

Discretionary fiscal policy

Answer 4

Refers to actions selected by the government to stabilize the economy.

Question 5

Automatic stabilizers

Answer 5

Work automatically to steady the economy.

Question 6

Rational expectations theory

Answer 6

States that people anticipate that changes in fiscal policy will affect the economy in a particular way and that, as a result, people will take steps to protect their interests.

Question 7

Council of economic advisors

Answer 7

Is a group of economic advisors to the president.