Fiscal Policy
Who Controls Fiscal Policy?
Congress
Who Controls Monetary Policy?
The Federal Reserve
What does RGDP stand for?
Real Gross Domestic Product
What is government budget surplus?
When a government collects more money that it spends
What are the two key shifters in Fiscal Policy?
Government Spending and Taxes
Define NIR
The Nominal Interest Rate
What are the main shifters to Aggregate Demand?
C,I,G,Xn
What is government budget deficit?
When a government spends more money that it collects
Define Contractionary Fiscal Policy
Laws that will reduce inflation, reduce GDP, decrease Government spending, and increase taxes
Define Open Market Operations
The action of buying or selling government securities to adjust the supply of money in an economy
What are three key shifters in Long Run Aggregate Supply?
Trade, Technology, and Resources
What is the velocity of money relative too?
The velocity of money is relative to the exchange rate of a currency
What are the goals of Fiscal Policy?
Stability in the economy, unemployment levels, and inflation
What is the Reserve Requirement?
The set amount of money a bank must hold of its deposits at all times
What are some shifters to Short Run Aggregate Supply?
Supply changes and shocks, and changes to taxes
In a Phillips curve, what can shift the Long Run Phillips curve line?
LRPC will only shift is there is a change to the natural rate of unemployment
What are two actions Congress could take to fix a recessionary gap?
Increase Government spending and lower taxes
What are actions the Federal Reserve could do to fix a expansionary gap?
They could lower interest rates and purchase bonds
The Aggregate Demand curve would shift to the right bringing short run equilibrium away from Qfe and leading the economy into an inflationary gap
Why does the Long Run Phillips curve NOT shift when Long Run Aggregate supply shifts?