EconCh9 - Chapter 9 Fiscal Policy The government's spending...

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Chapter 9 Fiscal Policy – The government’s spending and taxing policies. Monetary policy – The behavior of the Federal Reserve concerning the nation’s money supply. Discretionary fiscal policy – Changes in taxes or spending that are the result of deliberate changes in government policy. Net taxes (T) – Taxes paid by firms and household to the government minus transfer payments made to households by the government. Disposable, or after-tax, income (Y d ) – Total income minus net taxes: Y-T Budget deficit – The difference between what a government spends and what it collects in taxes in a given period: G-T Government spending multiplier – The ratio of the change in the equilibrium level of output to a change in government spending. Tax multiplier – The in equilibrium level of output to a change in taxes. Balanced-budget multiplier – The ratio of change in the equilibrium level of output to a change in the government spending where the change in government spending is balanced by a change in taxes so as not to create any deficit.
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