ECON - Ch15.1 - Using Fiscal Policy - Section 1 - What is Fiscal Policy?

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What is the difference between discretionary fiscal policy and automatic stabilizers?

Discretionary fiscal policy requires government action through Congress to make changes in spending or taxation; automatic stabilizers use spending in the form of transfer payments and taxation in the form of progressive income taxes to steady the economy automatically.

How do expansionary fiscal policy and contractionary fiscal policy use the same fiscal policy tools in different ways?

Expansionary fiscal policy uses government spending and tax decreases and contractual fiscal policy uses decreased government spending and tax increases.

What is the role of the Council of Economic Advisers?

To advise the president on economic matters such as fiscal policy.

What are the two basic goals of fiscal policy?

To increase demand and to fight inflation.

Council of Economic Advisors

a group of economic advisors to the president.

Contractionary Fiscal Policy

a plan to reduce demand and slow the economy.

Discretionary Fiscal Policy

actions selected by the government to stabilize the economy.

Expansionary Fiscal Policy

is a plan to increase demand and stimulate the economy.

Fiscal

refers to government spending and debt.

Rational Expectancy Theory

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.

Fiscal Policy

uses taxes and government spending to affect the economy.

Automatic Stabilizers

work automatically to stabilize he economy.


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