Economics: Unit 7 Vocabulary

Expansionary Monetary Policy

A plan to increase the money supply designed to increase AD (shift AD curve to the right) to eliminate a recessionary gap & get to full efficiency.

Contractionary Monetary Policy

A plan to reduce the amount of money in circulation designed to decrease AD (shift AD curve to the left) to eliminate an inflationary gap & get to full efficiency.

Side-Side Economics

A school of thought based on the idea that economic growth can be most effectively created by investing in capital and by lowering barriers on the production of goods and services.

Classical Economics

A school of thought based on the idea that free markets regulate themselves. Asserts that markets function best without government interference.

Keynesian Economics

A school of thought based on the idea that the government should spend money during a recession to help stimulate the economy.

Expansionary Fiscal Policy

An increase in government spending and/or a decrease in taxes designed to increase AD (shift AD curve to the right) to eliminate a recessionary gap & get to full efficiency.

Fiscal Policy

Changes in government spending and taxes in order to achieve full-employment & full efficiency. The Federal Government (the president and congress) is in charge of Fiscal Policy.

Monetary Policy

Changes in the money supply in order to achieve full-employment & full efficiency. The Federal Reserve (the central bank of the US) is in charge of Monetary Policy.

Federal Budget

A plan for the federal government's revenues and spending for the coming year.

Contractionary Fiscal Policy

A decrease in government spending and/or an increase in taxes designed to decrease AD (shift AD curve to the left) to eliminate an inflationary gap & get to full efficiency.

Supply-Side Fiscal Policy

A decrease in taxes on businesses and/or a decrease in regulations on businesses designed to increase AS (shift the AS curve to the right) to eliminate stagflation.

Federal Budget Surplus

The amount by which revenues exceed spending in each yearly federal budget.

Federal Budget Deficit

The amount by which spending exceed revenues spending in each yearly federal budget.

Federal Reserve

The central bank of the United States. regulates banks & the money supply.

National Debt

The total amount owed by the federal government. The sum of each year's federal budget deficit & surplus added together.