Key Terms

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
Lumpsum taxes
Automatic stabilizers
Discretionary fiscal policy
Cyclically adjusted budget balance
Fiscal year
Public debt
Debt–GDP ratio
Implicit liabilities
government programs—like Social Security, Medicare, unemployment insurance, and food stamps—intended to protect families against economic hardship
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 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
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
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
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
fiscal policy that reduces aggregate demand by decreasing government purchases, increasing taxes, or decreasing transfers
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.
government debt held by individuals and institutions outside the government
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)
fiscal policy that is the direct result of deliberate actions by policy makers rather than rules
an estimate of what the budget balance would be if real GDP were exactly equal to potential output

Social insurance, p. 450

Expansionary fiscal policy, p. 452

Contractionary fiscal policy, p. 454

Autonomous change in aggregate spending, p. 457

Multiplier, p. 457

Marginal propensity to consume (MPC), p. 458

Lump-sum taxes, p. 459

Automatic stabilizers, p. 460

Discretionary fiscal policy, p. 460

Cyclically adjusted budget balance, p. 464

Fiscal year, p. 467

Public debt, p. 469

Debt–GDP ratio, p. 470

Implicit liabilities, p. 471