Essentially ignores the impact of the budget on the business cycle and focuses on fostering economic growth and stable prices, while keeping the economy as close as possible to full employment

The amount by which annual government spending exceeds tax revenues

Federal expenditures and taxes would have to be equal each year

Shows a hypothetical relationship between income tax rates and tax revenues. As tax rates rise from zero, revenues rise, reach a maximum, then decline until revenues reach zero again at a 100% tax rate

Public debt held by foreigners, which is roughly equal to half of the outstanding U.S. debt held by the public

Involves increasing government spending, increasing transfer payments, or decreasing taxes to increase aggregate demand to expand output and the economy

Balancing the budget over the course of the business cycle by restricting spending or raising taxes when the economy is booming and using these surpluses to offset the deficits that occur during recessions

The amount by which annual tax revenues exceed government expenditures

The time it takes for policymakers to confirm that the economy is in a recession or a recovery. Short-term variations in key economic indicators are typical and sometimes represent nothing more than randomness in the data

Policies that focus on shifting the long-run aggregate supply curve to the right, expanding the economy without increasing inflationary pressures. Unlike policies to increase aggregate demand, supply-side policies take longer to have an impact on the economy

A measure of the present value of all projected future revenues compared to the present value of projected future spending

Involves adjusting government spending and tax policies with the express shortrun goal of moving the economy toward full employment, expanding economic growth, or controlling inflation

The economic analysis of public and political decision making, looking at issues such as voting, the impact of election incentives on politicians, the influence of special interest groups, and rentseeking behaviors

Tax revenues and transfer payments automatically expand or contract in ways that reduce the intensity of business fluctuations without any overt action by Congress or other policymakers

The time required to turn fiscal policy into law and eventually have an impact on the economy

Involves increasing withdrawals from the economy by reducing government spending, transfer payments, or raising taxes to decrease aggregate demand to contract output and the economy

Arises from deficit spending requiring the government to borrow, thus driving up interest rates and reducing consumer spending and business investment

The part of the budget that works its way through the appropriations process of Congress each year and includes such programs as national defense, transportation, science, environment, and income security

Public debt owned by U.S. banks, corporations, mutual funds, pension plans, and individuals

The time policymakers must wait for economic data to be collected, processed, and reported. Most macroeconomic data are not available until at least one quarter (three months) after the fact

The time it takes Congress and the administration to decide on a policy once a problem is recognized

The total accumulation of past deficits less surpluses; it includes Treasury bills, notes, and bonds, and U.S. Savings Bonds

The government budget is limited by the fact that G − T = ΔM + ΔB + ΔA

Spending authorized by permanent laws that does not go through the same appropriations process as discretionary spending. Mandatory spending includes such programs as Social Security, Medicare, and interest on the national debt