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Macro Chapter 16
| Term | Definition |
|---|---|
| fiscal policy | the use of government's budget tools, government spending, and taxes to influence the macroeconomy |
| expansionary fiscal policy | an increase in government spending or decrease in taxes to stimulate the economy toward expansion |
| contractionary fiscal policy | a decrease in government spending or increase in taxes to slow economic expansion |
| countercyclical fiscal policy | fiscal policy that seeks to counteract business cycle fluctuations |
| marginal propensity to consume (MPC) | the portion of additional income that is spent on consumption |
| spending multiplier | a number that tells us the total impact on spending from an initial change of a given amount |
| automatic stabilizers | government programs that automatically implement countercyclical fiscal policy in response to economic conditions |
| crowding-out | phenomenon occurring when private spending falls in response to increases in government spending |
| new classical critique | the assertion that increases in government spending and decreases in taxes are largely offset by increases in savings |
| supply-side fiscal policy | policy that involves the use of government spending and taxes to affect the production (supply) side of the economy |
| Laffer curve | an illustration of the relationship between tax rates and tax revenue |
Created by:
v.virgil
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