Fiscal Economics

Keynesian Economics
idea that government can and should regulate the economy

Supply-sided Economics
idea that taxation is a major aspect of the economy

Classical Economics
idea that the markers regulate themselves

Multiplier Effect
idea that every dollar of change in government use of money is reflected in a greater change in the economy

how long the market would take to return to equilibrium
What problem did the Great Depression in the 1930s highlight that classical economics did not address?

Productivity Capacity
What is the maximum output that the economy can sustain over a period of time called?

periods of depression and inflation
What are the two main economic problems that Keynesian economics seeks to address?

automatic stabilizers
When the government collects taxes and pays out transfer payments as a way to balance the economy, what are these fiscal tools called?

a tax cut does not cause workers to work significantly more hours
What does experience show about the relationship of taxation and work?

about 40%
What is the current highest bracket for personal income taxes?

taxes and transfer payments
two keys to fiscal policy

John Maynard Keynes
creator of Keynesian economics to help explain the Great Depression

demand-sided economics
economists who agreed with the idea that demand drives the economy

answer to depression
gov’t spending so people would go back to work and spend their wages on goods and services

Republicans
use tax cuts to stimulate the economy

Democrats
use expansive government programs to stimulate the economy

increase tax or reduce spending
how can government reduce inflation

stable economy
one of the most important things fiscal policy can achieve

70% of GDP
how much do consumers constitute

16% of GDP
how much does government constitute

fiscal policy
using the taxing and spending powers of government to regulate the economy

accelerator
speeds up the process of making it more difficult at every point to stop the drop

entitlements
safety net in keynesian economics (SS, welfare, etc.)

recession and inflation
Keynesian economics prevents this form happening at the same time

Multiplier
any increase of decrease in investment spending has a multiplied affect in the economy

JB Says
ideas of supply-sided economics based on this mans ideas

concerned about the economics of the country
what was Keynes concerned about?

scared some and offended others
how did people feel about Keynes ideas?

Roosevelt
who didn’t want to use Keynes ideas and nerve liked them?

fall of investment spending which led to the fall of consumer spending
What was the problem with the Great Depression

FDR
Who wasn’t in favor of budget deficits?

World War II
what brought us out of the depression?

increased demand
how did the war bring us out of the depression?

budget surplus
situation in which budget revenues exceed expenditures

hyperinflation
extremely rapid increase in price of goods and services; inflation growing at a very high rate in a very short time; some countries inflation is over 500%

national debt
total amount of money the federal government owes to bondholders

treasury bill
short term bond

ourselves
most of the U.S. debt is owed to whom?

U.S. treasury bonds
how foreign countries loan U.S. money

crowding out effect
reduces available credit for everyone and government takes it and makes credit more expensive

crowding out and paying interest on debt
two problems of national debt?

limited
today, many economist think the role of the federal government in the economy should be _____

What do taxes under the Federal insurance contribution act (FICA) fund? Social security and medicare What do social security taxes pay for? benefits to older citizen, surviving family memebers of wage earners, and people with certain disabilities WE WILL WRITE …

Keynes Keynes argued that the solution to depression was to stimulate the economy (“inducement to invest”) through some combination of two approaches : a reduction in interest rates. Government investment in infrastructure – the injection of income results in more …

All of the reasons why it is difficult to implement balanced fiscal policy EXCEP a significant role for government in running of the economy An example of an automatic stabilizer is taxes WE WILL WRITE A CUSTOM ESSAY SAMPLE ON …

Fiscal year A 12-month period that is used for financial calculations Federal budget A written document indicating the amount of money the government will receive and spend WE WILL WRITE A CUSTOM ESSAY SAMPLE ON ANY TOPIC SPECIFICALLY FOR YOU …

Which of the following was not characteristic of the U.S. economy during the Great Depression? Less government involvement The study of aggregate economic activity for the economy as a whole is Macro Economics WE WILL WRITE A CUSTOM ESSAY SAMPLE …

How did Adam Smith’s economic ideas help the United States establish a free enterprise system? Check all that apply. 1.3.4 A government might enact expansionary spending when it is trying to increase aggregate demand for goods. WE WILL WRITE A …

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