17.7 KEY TERMS

image | interactive activity

Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.

Question

Social insurance
Expansionary fiscal policy
Contractionary fiscal policy
Autonomous change in aggregate spending
Multiplier
Marginal propensity to consume (MPC)
Lump-sum taxes
Automatic stabilizers
Discretionary fiscal policy
Cyclically adjusted budget balance
Fiscal year
Public debt
Debt–GDP ratio
Implicit liabilities
government debt held by individuals and institutions outside the government.
the increase in consumer spending when disposable income rises by $1. Because consumers normally spend part but not all of an additional dollar of disposable income, MPC is between 0 and 1.
government programs—like Social Security, Medicare, unemployment insurance, and food stamps—designed to provide protection against unpredictable financial distress.
spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics. In the United States, the largest implicit liabilities arise from Social Security and Medicare, which promise transfer payments to current and future retirees (Social Security) and to the elderly (Medicare).
the time period used for much of government accounting, running from October 1 to September 30. Fiscal years are labeled by the calendar year in which they end.
fiscal policy that increases aggregate demand by increasing government purchases, decreasing taxes, or increasing transfers.
government debt as a percentage of GDP; frequently used as a measure of a government’s ability to pay its debts.
taxes that don’t depend on the taxpayer’s income.
government spending and taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts and automatically contractionary when the economy expands without requiring any deliberate actions by policy makers. Taxes that depend on disposable income are the most important example of automatic stabilizers.
the ratio of total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change.
an initial rise or fall in aggregate spending at a given level of real GDP.
an estimate of what the budget balance would be if real GDP were exactly equal to potential output.
fiscal policy that reduces aggregate demand by decreasing government purchases, increasing taxes, or decreasing transfers.
fiscal policy that is the direct result of deliberate actions by policy makers rather than rules.