Fiscal Policy Ch.12 Flashcards

247211212	Automatic stabilizers	changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action
247211213	Discretionary fiscal policy	the deliberate manipulation of government purchases, taxation, and transfer payments to promote macroeconomic goals, such as full employment, price stability, and economic growth
247211214	Simple tax multiplier	the ratio of a change in real GDP demanded to the initial change in autonomous net taxes that brought it about; the numerical value of the simple tax multiplier is -MPC/(1-MPC)
247211215	Expansionary fiscal policy	An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output
247211216	Contrationary fiscal policy	to fight inflations, decrease government purchases or raise taxes. causes AD curve to shift to left, reducing real GDP and price level.
247211217	Classical economists	a group of 18th and 19th century economists who believed that economic downturns were short-run phenomena that corrected themselves through natural market forces; thus, they believed the economy was self-correcting and needed no government intervention
247211218	Employment Act of 1946	law that assigned to the federal government the responsibility for promoting full employment and price stability
247211219	Permanent income	income that individuals expect to receive on average over the long term
247211220	American Recovery and Reinvestment Act	enacted feb 2009, $787 mil in government spending to attempt to revive the economy