Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley L. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson University
| Budget deficit | The amount by which the expenditures of the federal government exceed its revenues in any year.
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| Budget surplus | The amount by which the revenues of the federal government exceed its expenditures in any year.
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| Built-in stabilizer | A mechanism that increases government's budget deficit (or reduces its surplus) during a recession and increases government's budget surplus (or reduces its deficit) during inflation without any action by policymakers; the tax system is one such mechanism.
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| Contractionary fiscal policy | A decrease in government expenditures for goods and services, an increase in net taxes, or some combination of the two, for the purpose of decreasing aggregate demand and thus controlling inflation.
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| Crowding-out effect | A rise in interest rates and a resulting decrease in planned investment caused by the federal government's increased borrowing in the money market.
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| Cyclical deficit | A federal budget deficit that is caused by a recession and the consequent decline in tax revenues.
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| Cyclically adjusted budget | What the budget balance would be for the total government sector if the economy were operating at an average or cyclically adjusted level of activity.
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| Expansionary fiscal policy | An increase in government expenditures for goods and services, a decrease in net taxes, or some combination of the two, for the purpose of increasing aggregate demand and expanding real output.
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| Fiscal policy | Changes in government spending and tax collections designed to achieve a full-employment and noninflationary domestic output; also called discretionary fiscal policy.
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| Net export effect | The idea that the impact of a change in monetary policy or fiscal policy will be strengthened or weakened by the consequent change in net exports; the change in net exports occurs because of changes in real interest rates, which affect exchange rates.
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| Political business cycle | The alleged tendency of government to destabilize the economy by reducing taxes and increasing government expenditures before elections and to raise taxes and lower expenditures after elections.
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| Progressive tax | A tax with an average tax rate that increases as the taxpayer's income increases and decreases as the taxpayer's income decreases.
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| Proportional tax | A tax with an average tax rate that remains constant as the taxpayer's income increases or decreases.
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| Regressive tax | A tax with an average tax rate that decreases as the taxpayer's income increases and increases as the taxpayer's income decreases.
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| Supply-side fiscal policy | Tax changes that affect the aggregate supply curve.
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2002 McGraw-Hill Higher Education