Fiscal Policy

Vocabulary

aggregate demand (AD)

the total demand for final goods and services in an economy at a given time

balanced budget

a government budget in which expenditures and revenues are equal

budget surplus

a government budget in which revenue is greater than expenditure

contractionary fiscal policy

a fiscal policy aimed at slowing economic growth

crowding out

an effect whereby government spending causes interest rates to rise and investment to fall as a result of government borrowing

deficit spending

a situation in which expenditures are greater than revenues

expansionary fiscal policy

increases in government spending or tax cuts designed to increase aggregate demand and lift the economy out of a recession

fiscal policy

government intervention in the economy through spending and tax policies

government debt

total funds owed by a government

government revenue

money taken in by the government through taxes and other measures

government spending

money spent by the government for various government programs

interest rate

cost of borrowing money, expressed as a percentage of the amount borrowed; or, equivalently, the return on savings

lag

the delay between the enactment of a policy and that policy's outcome or effect

multiplier effect

the additional effect on the economy or gross domestic product from a change in government spending or investment

New Deal

the Roosevelt-era program of expansionary fiscal policies in the 1930s aimed at ending the Great Depression

recession

two successive quarters during which gross domestic product decreases

unemployment

the percentage of the labor force who are looking for work