Lesson 8 The Business Cycle and Fiscal Policy

Lesson 8 The Business Cycle and Fiscal Policy - #8 The...

Info icon This preview shows pages 1–2. Sign up to view the full content.

#8: The Business Cycle and Fiscal Policy Key Terms: Aggregate Demand (AD): The total demand for all goods and services produced in the economy. Aggregate Supply: (AS): The total supply of all goods and services produces in the economy. Full Employment Equilibrium: The intersection of aggregate demand and aggregate supply, at which full employment is reached and prices have just started to rise. Business Cycle: Swings in national economic performance characterized by four phases: peak, contraction, trough, and expansion. Prosperity Cycle: An increase in aggregate demand leading to a cycle of higher production, more jobs, increased income, and greater consumption, resulting in even higher aggregate demand. Recession: A contraction of the economy lasting longer than two business quarters (6 months). Depression: A prolonged recession characterized by falling GDP, very high unemployment and price deflation. Circular Flow of Income: A model of the economy that sees the GDP as a total of all the money payments made to businesses and individuals. Leakage: Any use of income (such as saving, paying taxes, and spending on imports) that causes money to be taken out of the income-expenditure stream of the economy. Derived Demand: The demand for labour for the products being produced. Ex. The demand for workers to build cars. Stabilization Policies: Government intervention in the economy to try to stabilize it, using fiscal and monetary policies. Fiscal Policy: Government taxation, spending and borrowing policies used to try to stabilize the economy. Discretionary Fiscal Policy: Deliberate government action taken to stabilize the economy in the form of taxation or spending policies; often contrasted with automatic stabilizers.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern