Macro Econ Ch. 17 Terms

Individual Income Tax

A tax based on the income, of all forms, received by individuals.

Payroll Tax

A tax based on the pay received from employers; the taxes provide funds for Social Security and Medicare.

Corporate Income Tax

A tax imposed on corporate profits.

Regressive Tax

A tax in which people with higher incomes pay a smaller share of their income in tax.

Excise Tax

A tax on a specific good - gasoline, tobacco, alcohol.

Estate and Gift Tax

A tax on people who pass assets on to the next generation - either posthumously of during life in the form of gifts.

Proportional Tax

A tax that is a flat percentage of income earned, regardless of the level of income.

Crowding Out

Federal spending and borrowing causes interest rates to rise and business investment to fall.

Contractionary Fiscal Policy

Fiscal policy that decreases the level of aggregate demand, either through cuts in government spending or increases in taxes.

Expansionary Fiscal Policy

Fiscal policy that increases the level of aggregate demand, either through increases in government spending or cuts in taxes.

Automatic Stabilizers

Tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy slows down, and restraining aggregate demand when the economy speeds up, without any additional change in legislation.

Standardized Employment Budget

The budget deficit or surplus in any given year, adjusted for what it would have been if the economy had been producing at potential GDP.

Discretionary Fiscal Policy

The government passes a new law that explicitly changes overall tax or spending levels with the intent of influencing the level of, or overall level, of economic activity.

Marginal Tax Rates

The tax that must be paid on all yearly income.

Implementation Lag

The time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs.

Recognition Lag

The time it takes to determine that a recession has occurred.

Legislative Lag

The time it takes to get a fiscal policy bill passed.

National Debt

The total accumulated amount the government has borrowed over time, and not yet paid back.

Balanced Budget

When government spending and taxes are equal.

Budget Surplus

When the federal government receives more money in taxes than it spends in a given year.

Budget Deficit

When the federal government spends more money than it receives in taxes in a given year.